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The Benefits of Employment Liability Practices Coverage:
Civil Case Studies

Martin Smith
Martin Smith,
Partner

December 2015

By Martin Smith
First presented at an Employment Practices Liability Seminar

Introduction

Employment practices liability (EPL) coverage protect employers from a variety of actions brought by employees, including wrongful dismissal, sexual harassment, accommodation, discrimination, negligence, unjust enrichment, breach of contract, and breach of duty of good faith actions. This paper will examine cases that demonstrate the potential consequences of failing to have an EPL policy in place.

Wrongful Dismissal Actions
One way in which EPL policies benefit employers is by protecting employers against wrongful dismissal claims.

A recent British Columbia Supreme Court case is a strong demonstration of this.1 In this case, the owner of a Dairy Queen store gave an offensive manager a letter of probation explaining harassment allegations against her. The letter also gave the manager four weeks to correct her behaviour. The day after the letter was given to the manager, the employee told the owner that the manager was refusing to help out at the store, was complaining about the letter to customers, called the owner an idiot and a moron, and left work early. The owner fired the manager and alleged cause.

The manager sued for wrongful dismissal and sought reasonable notice, Honda damages and punitive damages. The British Columbia Superior Court ruled that the manager was wrongfully dismissed. However, it also held that neither Honda nor punitive damages were appropriate. The court agreed that the manager had acted inappropriately, but found that her behaviour did not amount to cause for dismissal, because the owner had not warned her about her behaviour and given her sufficient time to improve. The court also found that the manager’s behaviour did not amount to cause for summary dismissal because her actions “amounted to poor performance of the management responsibilities that she was attempting to fulfill”.2 The manager was entitled to damages based on a 16-month period of notice plus bonuses. The total amount of damages was $25,725.50.

Similarly, the Ontario Superior Court of Justice recently awarded a wrongfully dismissed employee $550,000 in punitive damages in the case of Pate Estate v Galway-Cavendish and Harvey (Township).3 The Township had dismissed the employee as a result of alleged discrepancies in building permit fees and pressured the OPP to lay criminal charges. This resulted in a four-day criminal trial and an acquittal. The employee sued the Township and was awarded damages for dismissal and malicious prosecution. The Ontario Court of Appeal reduced the amount of punitive damages to $450,000, but still found that the Township had severely mistreated the employee.4

Human Rights Violations in Civil Actions

EPL policies can also help employers avoid damages for human rights violations in civil actions.

EPL policies can also help employers avoid damages for human rights violations in civil actions. The Ontario Superior Court of Justice recently, and for the first time ever, awarded damages under the Human Rights Code.5 The employee, a certified general accountant, had ongoing back problems and stopped coming to work as a result. She provided her employer with a doctor’s note stating that she needed time off for medical reasons. The doctor recommended that the employee start a gradual return to work, but the employer refused. The employer sent the employee a letter advising that back restrictions concerned “critical abilities” that were “vital” to her being able to perform the job.6 The employee, who had worked for the employer for 16 months, was dismissed. She brought an action for damages for wrongful dismissal and for damages for human rights violation. The court awarded $20,000 to the employee. This case is significant for employers, as it means that discrimination and accommodation cases are not restricted to the Human Rights Tribunal.

Breach of Contract, Unjust Enrichment, Breach of Duty of Good Faith, and Negligence Actions

Finally, EPL policies can protect employers against actions related to breach of contract, unjust enrichment, breach of duty of good faith, and negligence. In yet another recent Ontario Superior Court of Justice decision,7 a plaintiff brought a class action lawsuit on behalf of personal bankers, financial advisors and other employees at the Bank of Nova Scotia who were seeking damages and injunctive relief. The employees alleged that the defendant's overtime policy amounted to a breach of contract, unjust enrichment, breach of duty of good faith, and negligence. The overtime policy required employees to obtain pre-approval of overtime if they were to be paid at the overtime rate. To fulfill the demands of their jobs, many employees worked overtime hours without receiving the overtime rate. The class action was certified by the Ontario Superior Court of Justice8 and the decision was upheld by the Ontario Court of Appeal.9 Leave to appeal to the Supreme Court of Canada was denied.10

In August of 2014, the Ontario Superior Court of Justice approved a settlement agreement which allows the employees to receive overtime compensation regardless of whether the overtime has been pre-approved.11 The settlement provides for a claims process that will allow for claims by employees going back as far as 13 years with no supporting documentation required. Counsel for the plaintiff estimates that the value of the claims could be as high as $95 million, and the defendant has paid about $10.45 million in legal fees to plaintiff's counsel.

Conclusion

The above cases show the many benefits of EPL coverage for employers. An employer's failure to have an EPL policy in place can lead to exposure to a variety of actions from employees, including wrongful dismissal, sexual harassment, accommodation, discrimination, negligence, unjust enrichment, breach of contract, and breach of duty of good faith actions.


1 Rodrigues v Shendon Enterprises Ltd, 2010 BCSC 941.
2 Ibid at para 34.
3 2011 ONSC 6620.
4 2013 ONCA 669.
5 Wilson v Solis Mexican Foods Inc, 2013 ONSC 5799.
6 Ibid at para 18.
7 Fulawka v Bank of Nova Scotia, 2010 ONSC 1148.
8 Fulawka v Bank of Nova Scotia, 2011 ONSC 530.
9 Fulawka v Bank of Nova Scotia, 2012 ONCA 443.
10Fulawka v Bank of Nova Scotia, 2013 CarswellOnt 3152.
11Fulawka v. Bank of Nova Scotia, 2014 ONSC 4743.


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