Lawyer Erin Brandt (nee Kizell), Contributor.
At the risk of repeating ourselves (see previous posts on just cause dismissals here and here), this week’s blog post revisits the topic of just cause and the potential for financial disaster when an employer makes unfounded allegations against an employee. In a recent, high-profile employment law decision from Alberta’s Court of Queen’s Bench, the employer faced harsh consequences when its efforts to justify dismissing an employee for cause backfired into judicial findings of bad faith. The wrongful dismissal case of Karmel v. Calgary Jewish Academy provides another harsh reminder to employers of the need for caution when claiming cause for termination.
The case of Karmel v. Calgary Jewish Academy
The plaintiff in Karmel was the Principal of the Calgary Jewish Academy (the CJA). At the time of his firing, he was approximately a year and a half into his second five-year fixed term contract with the school (which contained a provision allowing the CJA to dismiss him for cause prior to the end of the term).
The apparent turning point in Mr. Karmel’s employment occurred shortly before this contract began, when he and the President and Chair of the CJA Board had a dispute over what colour to paint the school’s hallways. This conflict escalated into an 18 month feud between the two men, culminating in Mr. Karmel’s dismissal in February 2013.
As summarized by the court, the CJA’s alleged reasons for cause related to:
- issues of enrollment, the grade 4 class, the IPP process, communication style, the principal improvement plan, and technology. Other miscellaneous concerns include denial of enrollment for children in August 2012, unprofessional behavior by staff, the teachers’ websites, not conducting exit interviews, scheduling personal vacation time, and the choice of paint colors for the school hallways. In other words, [CJA] relies on a wide range of causes.
Ultimately, however, the court concluded that these reasons had “no merit”, that Mr. Karmel had made numerous good faith attempts to resolve the issues plaguing the CJA, and that his dismissal was wrongful. In fact, the court found that it was the employer who had engaged in bad faith conduct, with the CJA President “pursuing a strategy of papering a path to Mr. Karmel’s termination in such a way as to spare the CJA from paying the balance of Mr. Karmel’s salary under the remaining term of his contract”. The court’s bad faith finding was also apparently influenced by the fact that CJA’s conduct resulted in Mr. Karmel’s “mental distress and isolation in his [tight-knit] community”, causing harm to both his reputation and mental health. Mr. Karmel’s efforts to find alternative employment were ultimately unsuccessful, and he was forced to retrain and work as a private investigator.
The damages award
The employer’s liability in this case was significant. As a result of the CJA’s failed cause allegations, Mr. Karmel was awarded wrongful dismissal damages equal to the balance of his employment contract ($606,027.97). More notably, because of the employer’s failure to fulfil its duty of good faith, both at the time of dismissal and for 18 months prior, Mr. Karmel also received an award of $200,000 in aggravated damages. Not surprisingly, the CJA is appealing this decision to the Alberta Court of Appeal (read the CBC article here).
Lessons for employers
Since the legal principles underlying the Alberta court’s decision in Karmel apply across the country, we encourage all Canadian employers to reflect on the lessons from this case (which are subject, of course, to the appeal court’s eventual ruling), including:
- Creating an unfounded paper trail of alleged employee misconduct will not be enough to prove there was cause for termination, and may amount to bad faith employer conduct justifying an award of aggravated (or even punitive) damages.
- A prolonged pattern of such bad faith behaviour towards an employee may result in a proportionately higher award of such damages.
- Where employment and its termination occur within the context of a close-knit organization and community, this can have particular impacts on an employee’s reputation and mental health, leading to an increased damages award.
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