Ouch! Bully Tactics Cost Employer $100,000 In Punitive Damages.

Relationships end. When they do, it is best to end them kindly and walk away. Recently, an employer experienced the high cost of ending a relationship with a former employee badly.

The relationship started through an asset purchase agreement whereby the employer corporation purchased the assets of the employee's corporation. As part of the sale, the selling owner and his wife entered into employment contracts with the purchaser. The employment contracts provided that if the wife was dismissed, $105,000 of her income would be added to the income of the husband employee. The sale price, of several million dollars, was subject to an adjustment which would be determined by arbitration if the employer and employee could not agree on the amount.

Over a year went by without difficulty but the parties could not reach agreement on the issue of the price adjustment. The employee gave notice that he wanted to resolve the issue through arbitration. Shortly after the employer was given the notice, its principal simultaneously terminated the employment of the employee and of his wife. By simultaneously terminating the employment of both spouses, the employer would save paying the wife's income to the husband employee. As grounds for termination, the employer alleged that the husband employee was not working effectively and had not disclosed a conflict of interest prior to the sale.

The court rejected the assertion that any grounds for termination existed. It stated:

The conduct of the Defendant corporation is outrageous because Altus got mean and cheap in trying to get rid of an employee as they approached arbitration for the determination of any adjustment in the asset purchase agreement price. They had a contracted process in place and chose to park it with an unfounded allegation to fire him. Altus paid Alan Gordon no money. Further, Altus expected Alan Gordon to act within the contract terms in not competing with Altus. In effect, he got nothing and was expected not to work within a competitive field to that of Altus. That appears to me to amount to Altus wanting to have its cake and to eat it. Now, there is no free lunch in this world and Altus cannot expect to have one.

Punitive damages must be based on an independent actionable wrong, which the court found had occurred when the employer terminated the employee after notice of the arbitration had been given. The employer's refusal to honestly perform its contractual obligations as employer and its "bully tactics" resulted in the punitive award.

The Lesson: If you are going to terminate an employment relationship, make sure you have proper grounds to do so and provide proper notice, or payment in lieu of the same.

Gordon v Altus, 2015 ONSC 5663 https://www.canlii.org/en/on/onsc/doc/2015/2015onsc5663/2015onsc5663.pdf

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