Employee Termination and the Importance of Being Fair

Employers should take note of the recent jury decision in Higginson v. Babine Forest Products Ltd., which illustrates the importance of treating employees fairly when they are let go. It also demonstrates that long term employees can be entitled to very large rewards for their length of service.

In the Higginson case, a jury awarded an employee, Larry Higginson, about $800,000 in compensation from his former employer, Babine Forest Products Ltd. (“Babine”). Mr. Higginson had been employed by Babine for about 34 years, at which point he was “let go” from his employment. Babine alleged that there was cause for the dismissal, however Mr. Higginson argued at trial that Babine had made up the cause for dismissal in order to avoid paying Mr. Higginson the great amount of severance he had built up after 34 years of service. Mr. Higginson also argued that Babine had attempted to make his job miserable just before he was terminated to encourage him to quit. In its decision, the jury sided with Mr. Higginson and awarded him $236,000 in compensatory damages (damages for his losses, including severance), and $573,000 in punitive damages (damages to deter and punish).  This is the largest punitive damages award in an employment law case in Canada.

It should be noted that punitive damages in employment cases are definitely the exception rather than the rule. While a court must consider many factors in deciding whether or not to award punitive damages, punitive damages can be awarded against an employer where the employer’s conduct departs markedly from the “ordinary standards of decency—the exceptional case that that can be described as malicious, oppressive or high-handed and that offends the court’s sense of decency.”

The Higginson case demonstrates the risks of treating an employee unfairly and unreasonably. When an employee is treated fairly, you minimize the risk that punitive damages will be ordered against you. You also avoid the embarrassment and legal fees that can be associated with a legal proceeding. Further, by being fair and reasonable with your employees, you can often limit what you pay the employee to only the severance that is owed.

Are you about to let an employee go? You should be aware of your obligations to act in good faith in terminating an employee. To seek advice about how to avoid a punitive damages award being made against you, please contact us today.