Last June CCP blogged about the risks employers face when they bring suspect counter-claims and make allegations of just cause that they can't support at a wrongful dismissal trial [click here for Kelsey Orth's previous blog]. In Ruston v. Keddco Mfg. (2011) Ltd. a trial court determined that the employer's hardball tactics in bringing a 1.7 million dollar counter-claim and making allegations of cause that they couldn't prove at trial justified an award of $125K in punitive and moral damages. The employer sought to appeal the trial decision.
Unfortunately for Keddco, the Court of Appeal was as unimpressed with the Company's tactics as the trial judge had been. In upholding each of the trial judge's damages awards (19 months' wrongful dismissal damages for a senior executive employed for 11 years, bonus entitlements, $25K in moral damages, $100K in punitive damages and $546,684.73 in costs) the Court of Appeal sent a clear message that it will not interfere in a well-reasoned decision of a lower court where the evidentiary record supported damages for egregious conduct. To add insult to injury the Court of Appeal also awarded $35,000.00 in costs for the appeal to Mr. Ruston.
The pivotal finding by the trial judge that the counter-claim was initiated solely for the purpose of intimidating the plaintiff should serve as a stern reminder to employers that the use of counter-claims in wrongful dismissal litigation as a negotiating tool can have serious repercussions. While it is speculative on our part, we suggest that had this case just been about the wrongful dismissal, even with allegations of just cause, the damages award would likely have been significantly less. Trial judges have found that making good faith just cause allegations, even if not proven at trial, do not automatically result in extraordinary damages. Nonetheless, like counter-claims, just cause allegations should be made sparingly in wrongful dismissal litigation and only where an employer is confident that they can show that the cause position has been made in good faith.
While just cause allegations and counter-claims have their place in wrongful dismissal litigation, knowing when to utilize these extraordinary steps requires an objective evaluation of the merits of an employer's case. All too often, bad blood between the parties can taint an employer's view of the strength of their case. Because of this, employers are well advised to seek legal advice before they ever take a cause position. The CCP team can assist employers in evaluating how to address potential cause issues before triggering a dismissal so that employers can minimize risks and have expert legal advice on their chances of successfully defending these extraordinary claims.
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