In Chu v China Southern Airlines Company Limited, 2023 BCSC 21, the court held that an employer that attempted to manufacture just cause for the termination of a vulnerable employee breached its duty of good faith and fair dealing.  The employee successfully claimed damages from the employer for wrongful dismissal for failure to provide reasonable notice of the termination of his employment, and aggravated damages and punitive damages based upon his employer’s breach of duty of good faith and fair dealing in the manner of his dismissal.  The employee was awarded over $200,000; $58,053 in damages for wrongful dismissal, $50,000 for aggravated damages, and $100,000 for punitive damages. 

Background

From 2011 to 2018, the employee worked as the Marketing and Business Development Manager.  He worked closely and harmoniously with the general manager (GM).

In 2018, the GM was replaced by a second general manager (GM2) whom the employee claimed was dismissive of the employee's role and responsibilities, excluded him from management meetings, unfairly criticized his work, reprimanded him publicly, threatened his dismissal, and formally disciplined him for attending industry events, among other things.

The marketing department was eliminated and GM2 attempted to manufacture cause for the employee’s dismissal.  The employee was demoted twice with a 25% salary reduction.

The employee alleged that the employer engaged in a pattern of bad-faith abusive conduct (e.g., unfair discipline, insincere warnings, manufactured cause, and public embarrassment).

The employee was 68 years old when his employment was terminated..  In his termination letter, the employer alleged that the employee was incompetent, and made unspecified allegations of “time theft.”

Decision

The court reviewed the applicable legal principles, noting it is difficult to establish just cause based on incompetence, especially in the case of a long-term employee with a good performance record. In the absence of “a flagrant dereliction of duty clearly inconsistent with the proper discharge of the employee's duties,” an employer must demonstrate that:

• the employer established an objectively reasonable, attainable standard of performance that was communicated to the employee;
• training was provided to enable the employee to meet the standard, the employee was given a reasonable time to meet the standard, and  warned that failure to meet it  would result in dismissal; and
• the employee was incapable of meeting the standard.

The court noted that an employer memo expressed concern about the job’s requirement to sometimes work overnight, and the risk that the employee could fall and get injured.

Just Cause for Dismissal

The court found that the employer “singularly failed” to establish just cause for dismissal without notice; the employer’s allegations were either entirely unsupported by evidence or without merit, and the employee was entitled to damages for wrongful dismissal.

Reasonable Notice Period

In determining that the employee’s reasonable notice period should be 20 months, less income earned in 2020, the court took into account: the nature of the employee’s employment and level of responsibility; the employee’s length of service (8+ years); the employee’s age (68) and that older employees often find it difficult to find reasonable alternative employment; and that the employee’s work experience was in a niche area and there was no comparable employment available to him. 

Aggravated Damages

The court awarded the employee $50,000 in aggravated damages for mental distress he suffered due to the employer’s breach of the duty of good faith and fair dealing with respect to the  his dismissal. The court highlighted, among other actions, the employer’s unfair disciplinary tactics; decisions to demote him; steps to manufacture cause for dismissal or to induce him to resign; false allegations of “time theft”; failure to provide the plaintiff with a record of employment , which delayed the employee’s access to employment insurance by about two-and-a-half months; false statements regarding the employee (e.g., dishonesty, fraud, theft, conspiracy, sexual harassment) in the Response to Civil Claim , a publicly available document; and denigration and disparagement of the employee’s work record.

The court found that as a result of the employer’s breach of good faith and fair dealing, the employee suffered compensable psychological injuries/mental distress well before he was terminated, and for approximately one year post-termination; this mental distress was caused by the degrading demotions and public discipline.

Punitive Damages

The court noted that the caselaw provides that an employer’s breach of its contractual duty of good faith and fair dealing in the manner of dismissal can ground an award for punitive damages in exceptional cases where the employer engages in  wrongful acts that are so harsh, vindictive, reprehensible and malicious, outrageous, and extreme in nature, that they are deserving of punishment on their own. 

The court determined that the employer’s conduct in relation to the breach of its duty of good faith and fair dealing in the manner of the employee’s dismissal could be comfortably described as planned and deliberate “hardball tactics” that were “harsh, vindictive, reprehensible and malicious” and “extreme”; this conduct extended over five years, including through the litigation, and by any reasonable standard  deserved “full condemnation and punishment.”  Accordingly, the court awarded the employee $100,000 in punitive damages.

Bottom Line for Employers

China Southern Airlines cautions employers how not to behave when alleging that an employee’s employment is being terminated for cause.  An employer’s inappropriate conduct in these circumstances can be costly.  Employers must remember that they will find it difficult to establish just cause based upon incompetence, especially in the case of a long-term employee who has had a good record of performance.