By Howard Levitt and Maria Belykh

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Howard Levitt: Employers should avoid this big mistake when terminating employees Back to video

Last month, a court punished the Hudson’s Bay Company for the manner in which it abruptly fired Darren Pohl, a sales manager, from his 28-year employment.

HBC broke one fundamental tenet of employment relations in the process of severing ties, breached the “duty of good faith” it owed him.

What does a duty of good faith mean? Put simply, it requires employers to not be unduly insensitive or unreasonable when terminating. They must be candid and forthright. This overarching legal principle exists to protect employees from the power imbalance between themselves and their employers.

HBC breached its duty of good faith in a number of ways, the court found.

First, it offered Pohl continued employment with the company, albeit, in a lesser-paid, minimum wage role as a sales associate with no guaranteed minimum weekly hours. HBC said it was offering him a chance to limit the extent of the harm he suffered from being terminated from his managerial role while continuing to work for his life-long employer. The court disagreed.

Justice Robert Centa of the Superior Court of Justice was not convinced that the employer had any honest intention in making this offer and characterized HBC’s behaviour as misleading. He found that HBC’s offer was “carefully designed” to “gut Mr. Pohl’s contract while purportedly not triggering a constructive dismissal” because it contained a clause that would allow HBC to make any change it wished to Pohl’s employment contract, at any time, for any reason, without such a change constituting a constructive dismissal. If Pohl accepted this offer, he would be deemed to have resigned from his previous role and would instantly lose his right to sue for reasonable notice on a 28-year career (as well as the ability to claim employment insurance benefits).

The second transgression HBC committed was failing to pay Pohl his minimum Employment Standards Act entitlements until two months after his termination, ignoring Pohl’s lawyer’s repeated requests for the payment.

Courts have grown intolerant of employers who do not pay employees the bare minimum of what they are entitled to upon dismissal. They have been clear that employers must both pay the minimums and inform the employee that they will do so at a minimum at the outset of any settlement negotiations, which HBC failed to do.

The court also took issue with HBC’s failure to issue Pohl’s record of employment (ROE) within a timely fashion contrary to the Employment Insurance Regulations. The ROE was not only two years late, but it contained false information. HBC mischaracterized the termination as a layoff with an unknown expected date of recall. Pohl sought to prove that the employer made the misrepresentations for the purposes of applying for the Canada Emergency Wage Subsidy to which it was not entitled. The court made no finding either way on this.

Finally, the court also found that making a show of walking the employee out the front door immediately after terminating him was unduly insensitive. Although this is standard practice in many Canadian organizations, this finding reveals how much judges are willing to bend the line of sanctionable impropriety when they find that an employer is acting inappropriately in other ways.

Justice Centa referred to HBC’s conduct as “untruthful, misleading, and unduly insensitive.” He ruled that “HBC was placing its interests above (Pohl’s) and that this increased his sense of exploitation, humiliation, and depression.” In addition to receiving 24 months’ reasonable notice, he awarded Pohl $55,000 for the employer’s multiple transgressions.

In our practice, we see many employers make one or several of HBC’s mistakes upon termination. Most workplaces do not set out to mistreat their staff or otherwise act in bad faith but are simply uneducated about the process of termination. However, courts have historically shown zero to little tolerance for anything less than ideal compliance with employment standards legislation upon termination and have found a wide range of conduct to amount to a breach of the duty of good faith.

It would be wise to learn a few lessons from HBC’s experience and similar cautionary tales:

Howard Levitt is senior partner of Levitt Sheikh, employment and labour lawyers with offices in Toronto and Hamilton. He practices employment law in eight provinces. He is the author of six books including the Law of Dismissal in Canada. Maria Belykh is with Levitt Sheikh.