Employee compensation is a fundamental aspect of employment law, both during and after employment. Employers must properly pay out any wages, salaries, commissions, etc., validly owed to the employee. Employers cannot knowingly refuse to pay out their employees, as it would likely be considered a breach of the employment contract. This can lead to significant punitive damages, as seen in Giacomodonato v. PearTree Securities Inc., 2023 ONSC 3197.
In this post, we will discuss the importance of carefully considering the terms of the employment agreement as it relates to termination. In particular, it may involve terms for paying out employees that an employer is obligated to fulfill. We will also discuss circumstances where a court may order punitive damages, which are often unavailable. We will also examine the Giacomodonato case, in which the court ordered the employer to pay $10,000 in punitive damages for knowingly failing to pay out the employee.
This post will provide key takeaways for employers and employees where there may be a termination and amounts owing to the employee.
Carefully Consider the Terms of the Employment Agreement For Termination
The termination clause is one of the most important parts of an employment agreement. It is important to note that employers cannot contract outside of the minimum employment law standards set by legislation. In particular, upon termination, the employee must at least receive the minimum compensation set out in the Employment Standards Act. In some cases, if a termination clause is too broad or ambiguous, the termination clause may be invalid and, therefore, unenforceable. Due to this, it is important to consider the termination clause carefully.
Under the employment contract, the employee may also be entitled to compensation beyond their salary, such as commission, bonuses, or overtime pay. These forms of compensation are usually set out in the employment contract, and it is important to have clear terms on when these entitlements are available and how they are calculated. If there are any changes to the bonus or commission structure, it is often helpful to have this set out in writing in case of any dispute. If the matter moves to court, the judge will look to the employment contract terms to make its determination.
Compensation During Notice Period
Employees are entitled to a notice period or pay in lieu when they are terminated. During the notice period, employees may be entitled to compensation other than salary, such as benefits, commissions, or bonuses. Under the Employment Standards Act, employees are entitled to stay on their employer’s benefits plan during notice. Benefits can include medical and dental, disability coverage, pension and RRSP contributions, life insurance, vacation pay and more. If the employee’s plan is cancelled before the end of their notice period, then the employer will need to cover the cost based on the employee’s duration of entitlement.
Employees may be entitled to other compensation, such as bonuses and commissions unless the employment contract terms exclude them.
Also, depending on the employment contract, the employee may be entitled to additional severance pay beyond the reasonable notice period if they meet the criteria set out in the contract.
When Are Punitive Damages Available For Wrongful Dismissal?
Punitive damages are only available in very limited circumstances. They are only available in exceptional cases where malicious, oppressive, or high-handed conduct warrants punishment based on the court’s assessment. The misconduct in question must significantly depart from ordinary standards of reasonable behaviour. In particular, the conduct may be described as harsh, vindictive, reprehensible and malicious.
It is not enough to find that the plaintiff was successful in their claim. Punitive damages are available if there is an independent actionable wrong, including the employer’s breach of their implied duty of good faith and fair dealing. Suppose an employer fails to comply with the Employment Standards Act. In that case, they may be subject to punitive damages if their conduct rises to a level that deserves punishment, according to the court’s assessment of the circumstances.
Overall, punitive damages are an exceptional measure and not necessarily available in all cases. There is a high standard to find that there was misconduct to warrant punitive damages.
Court Orders $10,000 in Punitive Damages for Employer’s Failure to Pay Out Employee
In the Giacomodonato case, the court ordered the employer to pay $10,000 in punitive damages to the employee for failure to pay out amounts owed to the employee.
The employer had terminated the employee without notice in January 2018. However, at that time, the employer was aware that it still owed the employee a significant amount of compensation for the period of July 2016 to July 2017. There was also a second employment contract, and the employee was also entitled to some compensation from this second contract.
Shortly after being terminated, the employee was asked to sign a certificate stating that he had not breached his restrictive covenants involving non-competition. However, the employee was not required to do so under any terms of the employment contracts, and he refused to sign. The employer concluded that the employee must have breached their covenants, even though there was no evidence of this.
A few months later, the employer advised via letter that they would not continue paying the employee’s salary continuation payments under the second employment contract. In the letter, the employer set off the money owed against the money already paid. Also, the letter included a cheque with a term that the employee would give up all his entitlements to the amounts owed if he deposited the cheque. The employer explained that their actions arose from the employee’s refusal to sign the certificate.
The court found no basis for the employer to take these steps in withholding or setting off amounts owed to the employee. The court noted that the employer abused their position of power in doing so. As a result, the court awarded the employee $10,000 in punitive damages.
Contact Haynes Law Firm in Toronto for Advice on Termination and Wrongful Dismissal Claims
Employers and employees should carefully consider the termination clauses set out in the employment contract, as there are significant consequences if the clauses do not comply with legislative standards, including a potential wrongful dismissal claim. Employers may also be subject to punitive damages for failing to pay out amounts owed to the employee under the employment contract. Our experienced employment law legal team at Haynes Law Firm in Toronto can assist you with issues that arise from termination. For employees, our goal is to ensure that they understand their rights and receive maximum compensation in wrongful dismissal cases. Haynes Law Firm also assists employers in avoiding liabilities that may arise from terminations that are not permitted by the legislation. We are dedicated to finding the best resolution for you.
To book a consultation, please contact us online or by phone at 416-593-2731.