Small claims court once allowed former employees to pursue damages against their employer in a timely, cost-effective manner. Not anymore

For employees who don’t earn hundreds of thousands of dollars per year, the small claims system used to be a viable option to file a wrongful dismissal claim for up to $35,000 (in Ontario, for example). Following the filing of a defence, a settlement conference in front of a judge could be heard within three months and, if necessary, the matter could be set down for trial after paying a $100 fee.

Small claims trials can be run by paralegals, articling students, or even the plaintiffs themselves. We have often recommended to plaintiffs with small cases that they take on the cases themselves or, if a little larger, use one of our articling students. This alternative allowed former employees to pursue damages against their employer in a timely, cost-effective manner.

This all changed following the COVID-19 pandemic. Take, for example, a small claims court matter one of our juniors is defending for one of our employer clients. We were served the plaintiff’s claim in August of 2020. We delivered our defence in September of 2020. As of today, we have yet to receive any notification of a settlement conference, and do not expect to receive one this year. No other action has been taken on the file. The plaintiff’s third representative recently reached out to introduce themselves, as the previous representatives had moved on from the law firm. The plaintiff in this matter will likely not see any recovery for at least another two years. For an employee terminated during the pandemic, is it reasonable for them to have wait three to four years to recover damages? There is no mandatory mediation in small claims court. Settlement conferences scheduled by the court are often the only step between the filing of a defence and a trial.

Some lawyers have taken the approach of tacking on $100,000 in punitive or bad faith damages (without merit) in order to bring a small claims matter in Superior Court. We recently received a claim for a minimum-wage employee who was terminated for around $25,000 in wrongful dismissal damages, and another $100,000 in punitive and bad faith damages. What these firms do not consider (and do their poor clients know?) is that if they obtain less than $35,000 in Superior Court after the legal fees, even if they win, they will presumptively be deprived of any costs so will have legal fees vastly exceeding their recovery.

Not only is this an employment law issue, but this court backlog has also now turned into an access to justice issue. A non-functioning small claims court system effectively deprives a significant section of the population from accessing affordable legal services. The backlog is also forcing claims that should have been brought in small claims court into Superior Court, mistakenly as we stated, but further clogging up those courts. Young lawyers and articling students are unable to gain the valuable experience they would normally receive from frequent attendance at various hearings in different levels of court.

With the availability of Zoom hearings, one would expect the courts to be operating at a record pace. But with a shortage of judges to attend those hearings, the court backlogs are being exacerbated.

Inadvertently, this has become a boon for employers facing actions in small claims court. They can take solace in knowing that it will be years before any matter is heard and be forced to pay damages, assuming the employee has the tenacity to persist. They can now afford to take hard stances against employees who have filed in small claims court, freeing up cash flow in the interim. They will likely have found new employment and possibly, lose interest in their claims well before any court date comes available.