Author: Howard Levitt
Publication: National Post
Here’s a nightmare scenario for employers: What if a court awarded more than $1-million in wrongful dismissal damages to one of your employees earning $70,000 a year?
That was the judgement against Canac Kitchens in the case brought by Luis Romero Olguin. Olguin immigrated to Canada from Chile in 1979 and quickly found work at Canac. He eventually became a “team leader” and worked there for 24 years before being terminated in a restructuring. Two weeks later, the 55-year-old found work at Cartier Kitchens, at a much lower salary, and worked there for 15 months before undergoing surgery for laryngeal cancer. In the five years leading up to the case being heard by the Ontario Superior Court of Justice last month, Olguin underwent many additional surgeries, and more are scheduled.
Justice Echlin commented that “regrettably” Canac only provided Olguin with eight weeks disability. Cartier Kitchens never offered disability insurance as part of its compensation package.
In deciding this case, Justice Echlin noted “the existence of any real or imagined rule of thumb (of one month a year of service or any other amount) has been ruled out by the Court of Appeal for Ontario” (as in other provinces). He awarded Olguin a period of notice of 22 months based on a salary of $71,000.
He found that Canac, in the years leading up to trial, despite Olguin’s predicament, never advanced him any more than the Employment Standards Act minimum.
“Canac consciously chose not to make alternative arrangements to provide its loyal, long-service employee with replacement disability coverage. Rather, it chose to go the bareminimum route. It provided only the statutory minimums in pay and benefits and then gambled that he would get another job and stay well. When it lost that gamble, it chose to litigate this matter for over five years. When confronted with its potential significant exposure, it raised the argument that Mr. Luis Romero Olguin failed to mitigate his potential damages by purchasing his own replacement disability policy. I reject that argument,” Justice Echlin said.
In noting that the purpose of wrongful dismissal damages are to “make the employee whole” for the period of reasonable notice, he also rejected Canac’s argument that Olguin was disentitled to LTD benefits because he was “not actively at work” at the time of his disability as per the wording in the LTD policy.
And it is the LTD issue that has the biggest implications. The combined impact of Olguin’s earnings from his new employer plus the 32 weeks severance from Canac under the Employment Standards Act amounted to virtually the same as his wrongful dismissal damages up to the date he became disabled. Even his salary for the period after that was not onerus. But awarding Olguin disability benefits to age 65, or $204,000 and a further $15,000 for its “hardball approach” and $125,000 in legal costs. The LTD damages were slightly more than $200,000 only because the LTD benefits were only $2,096.04 a month and Olguin was 57 when he became disabled.
But what about the many Canadian employees with more generous LTD policies who become permanently disabled while in their thirties or fourties? Their damages, with interest, could be in the millions. Here are a few things employers can do to prevent this:
- Extend LTD coverage to terminated employees for as long your insurer permits;
- Advise employees of replacement disability coverage. If Canac had done that, and it was at a reasonable cost, the court might have found that he failed to mitigate if he had not purchased it;
- Determine whether your insurer will extend its coverage to terminated employees. Most will not;
- Regarding the punitive damage award, you need not pay full wrongful dismissal damages to an employee who does not sign a release. But you should generally provide more than minimum standards;
- If a terminated employee, with whom you have not settled, experiences a life crisis, be more generous. The court will.