By Howard Levitt and Eduard Matei
Case shows what consequences can follow when rules are ignored
China Southern Airlines Co. Ltd. (CSA) is an interesting company. The sixth-largest airline in the world, it operates over 650 airplanes with more than 2,000 flights to over 200 destinations daily. While publicly traded, the airline is owned by the People’s Republic of China. In short, not a small operation.
The story of how CSA became embroiled in and navigated the Canadian legal system in Chu vs. China Southern Airlines, a decision of the B.C. Supreme Court on Jan. 5, 2023, is an edifying checklist of what not to do when terminating employees in Canada and what consequences follow when rules are ignored.
Paul Chu, 68, worked for CSA for eight years, attaining the title of marketing and business development manager, representing CSA in business and industry organizations and events, as well as dealing with regulatory issues.
In his final year of employment, a new general manager came in as his direct supervisor, who did not believe Chu’s role was important or necessary.
Rather than simply terminating him, the new GM directed CSA to take a number of different actions including: demoting Chu to an entry-level front line position as an airport worker without adequate retraining; substantially reducing his pay; continuing the expectation of high level senior management work being performed, despite the reduced pay and substantial additional duties; repeatedly and unfairly disciplining Paul in humiliating and publicly embarrassing ways, including throwing things at him at public events; and forcing him to sign disciplinary letters that he disagreed with.
The end result was that he was terminated for just cause, in February of 2019, for allegedly failing to perform his duties and engaging in “time theft.”
A termination for just cause nominally disentitles an employee from either severance, or even employment insurance. For those reasons, termination for just cause is not a decision employers should take lightly, as this column has written at length about before.
Understandably, Chu found legal counsel and sued.
CSA’s legal missteps
Throughout the legal proceedings, CSA refused to comply with multiple orders of the court, including: not providing documents supporting allegations made in pleadings, or even ones it said it had; not producing the new GM for questioning; not preparing for trial in a timely manner, resulting in an adjournment at the eleventh hour; and not paying costs ordered by the court during interim proceedings.
The result of its refusing to produce documents and witnesses was that the court concluded that CSA had no evidence to support its position. After three years of delay and noncompliance, Chu was entitled to push the matter forward to summary trial, allowing CSA to only rely on the evidence already on the record to support its position. In effect, CSA’s refusal to comply with the court’s orders resulted in its handicapping its ability to defend its case.
Most curiously, CSA decided to drop legal counsel and have two legally untrained officers at the airline represent it. To repeat, this company with a market cap of over $25 billion, owned by a government, elected to conduct a legally complex lawsuit in the British Columbia Supreme Court without legally trained representatives.
To say this is bizarre is an understatement (the old adage of “a man who is his own lawyer has a fool for a client” comes to mind), though it provides a measure of explanation of why such questionable decisions were made throughout the process.
Recall the scandalous and public allegations made by CSA which were subsequently withdrawn. CSA’s conduct both before, during and after Paul’s termination was enough to suggest that it caused unnecessary mental distress.
Where actions of an employer inflame injuries and inflate damages already owing, a court may award “aggravated damages,” as it did here, in the sum of $50,000.
Where, on the other hand, a court awards damages, not to compensate an employee but to punish an employer (or any other party) for outrageous conduct, it can award what is called “punitive damages.”
Here, the court concluded the airline’s actions and conduct throughout the proceeding were “harsh, vindictive, reprehensible and malicious.” The result? An additional award of $100,000 in punitive damages.
This could all then be garnished with an order to pay Chu’s legal fees for an unnecessarily prolonged legal proceeding.
Legal advice throughout this process could have helped not only with avoiding paying quadruple what the case was found to be worth, but also could have saved CSA from a public lambasting by the court.
As mentioned at the beginning, CSA’s actions in this case provide an instructive list of what not to do when deciding to let an employee go:
1. Take care when making decisions on how you terminate employees
Employment at its most basic is a simple contract: the employee works, and the employer pays for it. The reality is far more complicated.
Most people spend more time in their employment than any other single task in their lives (even than on social media). Treating employees well and abiding by the golden rule is generally an excellent way to avoid costly, unnecessary legal battles.
2. Respect the court and its orders
When a court provides an order, it has mechanisms to ensure those orders are complied with, whether by additional costs or undermining your ability to defend yourself, as in this case, or, in other circumstances, even warrants for arrest.
Refusing to provide documents, pay costs, or otherwise comply with the court’s processes may slow down the carriage of justice, but it will not stop it. Ultimately courts can and will make the difficult decision of simply proceeding without the input of the party that it deems as obstructing the proceedings. When that happens, consequences can and do magnify.
3. Get legal advice and representation
Knowledge of court proceedings is a skill in and of itself. The breadth of knowledge that comprises Canadian law is vast, stretching from criminal, to family, to wills, to corporate, and everything in between, in a list too large to be useful. Not all lawyers are comfortable in courtrooms. Those that do are called litigators. They then further specialize in specific fields, such as our firm in employment and employment litigation.
While it is not uncommon for parties to represent themselves, they do so at their own peril. While engagement with the legal system through a lawyer may seem expensive and burdensome, deciding to save the expense may well end up being far more expensive, monetarily, and reputationally.