Litigation conduct by employer results in significant monetary damages

February 8, 2023

It is an unfortunate but far too common practice for employers to take extreme positions in litigation, unreasonably delay the progress of a wrongful dismissal action, or to otherwise engage in improper conduct aimed at dissuading an employee from pursuing their lawful claims. However, employers should be warned: the courts are becoming increasingly less tolerant of this behaviour. As this recent decision from the Supreme Court of British Columbia proves, an employer may expose themselves to liability for significant monetary damages if they engage in bad faith conduct during an employee’s termination or during litigation.

The facts

In Chu v China Southern Airlines Company, an employee with over eight years of service brought a summary trial claiming wrongful dismissal damages as against his former employer. The employee alleged that his former employer engaged in a “broad and sustained pattern of bad faith abusive conduct” prior to his termination, which included an arbitrary demotion, unfair discipline and warnings, fabricated allegations of cause, and public humiliation which adversely impacted his well-being and his reputation.[1]

The employee further alleged that the employer’s bad faith conduct has continued through the course of the litigation. The termination letter provided by the employer made several allegations of cause, including “time theft” and that the employee’s “completely unacceptable performance” constituted just cause. After the litigation was commenced, the employer’s pleading made far more serious and extensive allegations than it had previously made in its termination letter. Shortly before the hearing of the summary trial, the employer abandoned a number of the most serious allegations, including the allegations of fraud, theft, and sexual harassment in the workplace. However, the employer continued to assert that it had cause to terminate the employee’s employment.[2]

The decision

At the summary trial, the Supreme Court of British Columbia determined that the employer had failed to establish just cause and awarded the employee damages equal to 20 months of notice for wrongful dismissal. What is more noteworthy, however, is that the court also awarded damages in the sum of $50,000 for the employer’s breach of its duty of good faith and $100,000 in punitive damages arising from the employer’s litigation conduct. In arriving at that decision, the Court noted the following key facts:

The evidence established that the employer (through the employee’s manager) secretly wanted and intended to terminate the employee’s employment.
Rather than simply terminating the employee without cause and offering him a fair severance, the employer “was duplicitous and unfair in its dealings with the [employee]” and instead chose to demote him to an entry-level position, substantially reduce his pay, and manufactured allegations of cause in an effort to induce the employee to resign.
The unfair discipline was carried out in humiliating and embarrassing ways, including publicly reprimanding the employee and yelling at the employee at meetings.
The employee was compelled to sign warning letters that he did not agree with, and the employer prepared a memorandum that misstated that the employee had agreed to voluntarily resign if his performance didn’t improve.
Given his age, experience, and former position, the employee’s “…reassignments without consultation to entry-level positions…were humiliating,” and he was set up for failure given the employee knew he could not possibly do the work to the employer’s satisfaction.
The employee was exceptionally vulnerable, given that he was 68 years old at the time of termination and had limited work opportunities.
In the termination letter, the employer alleged dishonesty by falsely stating that the employee was guilty of “time theft.” The employer also refused to provide a Record of Employment and delayed the employee’s access to Employment Insurance by approximately 2.5 months.
In its publicly available pleading, the employer made a number of serious and false allegations which it had not previously made in the termination letter.[3]

In respect of the punitive damages awarded as a result of the employer’s bad faith conduct in the litigation, the Court noted that the employer “…would have known that these allegations would damage [the employee’s] chances of obtaining reasonable alternative employment.”[4] The employer had made a number of serious and false allegations that it had not previously made in the termination letter (despite the fact that it knew or ought to have known those allegations could not be supported by the facts), only to retract those allegations shortly prior to the summary trial. The Court also noted that the employer had engaged in conduct designed to delay the progress of the action, including delays in delivering its documentary productions, being uncooperative in making arrangements for the employee’s counsel to examine the employer’s representative for discovery, and refusing to pay a costs award or to otherwise comply with court orders.

Key Takeaways

This case is yet another recent example of the courts taking steps to deter employers from engaging in bad faith conduct prior to an employee’s termination and during the course of litigation. Historically, some employers have targeted vulnerable employees with this kind of behaviour in an effort to dissuade them from proceeding with a wrongful dismissal action. However, this case should serve as a reminder to employers that such bad faith conduct can have serious financial consequences.

[1] Chu v China Southern Airlines Company, 2023 BCSC 21 at paras 23-34.

[2] Ibid at paras 40-44.

[3] Ibid at para 149.

[4] Ibid at para 169.