July 9, 2010
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Over the last couple of years, employment counsel have had to carefully review employees' circumstances to ensure they were not overlooking significant tort claims against employers. However, a recent decision of the Court of Appeal may have closed the door to employee tort claims based on negligence.

In Piresferreira v. Ayotte, [2010] O.J. No. 2224, the Ontario Court of appeal decreased a large claim won by an employee who was constructively dismissed and suffered from post traumatic stress disorder as a result of her abusive manager. The case involved an employee who was an account manager at Bell Mobility in Ottawa who suffered from increasingly strong verbal abuse from her manager. Her manager then physically pushed her in 2005 and, when the employee pressed for an apology, informed her that he was filling out a performance improvement plan for her.

While Bell Mobility investigated this incident and reprimanded the manager, it never informed the employee of this, and collaborated with her manager in imposing a performance improvement plan. The employee became ill, never returned to work and commenced an action for constructive dismissal and tort.

The trial judge found Bell Mobility liable for the torts of negligent infliction of mental suffering, intentional infliction of mental suffering, and battery. She concluded that the employee could never work again because of her disability caused by her manager and Bell Mobility, and awarded both general damages (of $50,000) and loss of income until the age of 65 ($500,924) less a 10 per cent contingency for the possibility she would not have worked until the age of 65. The trial judge would have awarded damages for constructive dismissal based on a 12-month notice period ($87,855) and bad faith in the manner of dismissal ($45,000), but did not do so on the grounds that they would have duplicated the tort damages.

The Court of Appeal overturned the damage award and determined that the tort of negligence and the tort of negligent infliction of mental suffering is not available in the employment context. Essentially, the appeal court replaced the tort damages with the damages for constructive dismissal. Despite evidence demonstrating that the employee was no longer able to work and would suffer a loss of future income, the appeal court only awarded the employee damages for constructive dismissal of $87,855, damages for bad faith of $45,000, and damages for battery of $15,000.

While the appeal court found that proximity and foreseeability existed to establish a duty of care, it concludedthat there should not be a duty of care between an employer and employee for "policy reasons." The court was of the view that recognizing the duty of care would duplicate the obligation of good faith and fair dealing, as well as claims for constructive dismissal, and was therefore unnecessary. The court based its decision in part on its conclusion that “no Canadian appellate court has recognized a free standing cause of action in tort against an employer for negligent infliction of mental suffering,” and that the recognition of such a tort is better left to the legislature.

This conclusion is problematic in a number of respects. First, the appeal court did not refer to Sulz v. Minister of Public Safety and Solicitor General, [2006] B.C.J. No. 3262, where the B.C. Court of Appeal upheld a damage award of over $900,000 based on such a tort claim (however, the employer conceded negligence, so the B.C. Court of Appeal did not have to address the issue directly.) Second, the appeal court is unclear whether its conclusion on the duty of care was limited to the tort of negligent infliction of mental suffering, or if it applied to negligence in general. As a consequence, there is some uncertainty as to how this decision fits with other cases that have recognized a duty of care in the context of the employment relationship. For example, in the leading decision on negligent misrepresentation, Queen v. Cognos Inc., [1993] S.C.J. No. 3, the Supreme Court of Canada (SCC) found a duty of care on the part of the employer making representations to an employee in the recruitment process.

Third, the tort of negligence (particularly negligent infliction of mental suffering) is not duplicative of the duty of good faith and fair dealing. As the SCC made clear in Honda Canada Inc. v. Keays, [2008] S.C.J. No. 40, the duty of good faith and fair dealing only applies to the manner of termination by the employer. For the tort to be duplicative, the duty of good faith to an employee would have to apply throughout the employment relationship, and that is not the case. In a decision that post-dated Keays, RBC Dominion Securities Inc. v. Merrill Lynch Canada Inc., [2008] S.C.J. No. 56, the SCC found that an employee owes a duty of good faith to the employer throughout the relationship. There is no good reason why the duty of good faith should not be reciprocal throughout the entire employment relationship; the appeal court has presumed that this is the case without pointing to any decision confirming that proposition.

The appeal court also refused to recognize a duty of care in the employment context on the basis that the matter is better left to the legislature. However, the Ontario legislature has spoken on this issue. Recent amendments to the Occupational Health and Safety Act (Bill 68), effective June 15, require employers to create and administer anti-harassment and anti-violence policies and programs. While the amendments to the Act were not law at the time of the decision, they send a strong signal that public policy favours recognizing a duty of care.

Finally, the Ontario Court of Appeal's award of damages for bad faith fails to compensate the employee for her actual loss. In Keays, the SCC stated that compensation for breach of the duty of good faith is to be awarded not through an arbitrary extension of the notice period, but through an award that reflects the employee's actual damages. In this case, the evidence established that the employee would no longer be able to work and thus suffered a loss of future income. Based on the principles in Keays, the damages awarded ought to have compensated the employee for the loss of future income, even though they were awarded on the basis of contract damages as opposed to tort. The loss of future income formed part of her actual damages.

Piresferreira has exposed issues that will require further appellate consideration, possibly by the SCC. In the interim, counsel should ensure that if they are pursuing a claim for bad faith, they lead evidence establishing a connection between a significant impact to an employee's health due to the manner of dismissal and the losses being suffered, in order to be entitled to an award of damages.

Steve Levitt practises employment law with Nelligan O'Brien Payne LLP LLP, a full service law firm in Ottawa.

[This article is reprinted with permission and first appeared in the July 2010 issue of The Lawyers Weekly.]

This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2017 Nelligan O’Brien Payne LLP.

Service: Employment Law