By Erin Brandt.
In December 2017, an Ontario Court ordered Wal-Mart Canada to pay a dismissed executive $750,000 in punitive and moral damages. As this award was one of the highest of its kind in Canada, we thought the case was worth special mention. What type of conduct by an employer could have led to such significant liability? Let’s find out:
First, a quick summary of the key facts relating to the former executive’s employment history:
- Gail Galea started working for Wal-Mart Canada in 2002 as a District Manager-in-Training. She was promoted at least six times over the next six years, landing in the position of Vice-President, General Merchandising.
- During this time, she signed a non-competition agreement which entitled her to two years severance pay if she was ever dismissed without just cause.
- By 2010, Ms. Galea expected that she would eventually be appointed Chief Merchandising Officer. However, in January 2010, she was removed from her VP role and relieved of her duties due to a restructuring. Wal-Mart Canada assured her that she was valued and that a new role would be found for her.
- In February, Ms. Galea was appointed Senior Vice-President Merchandising-Strategic Initiatives – a demotion. After 10 days, she had still not been assigned any responsibilities.
- At some point in 2010, Wal-Mart Canada lowered Ms. Galea’s employee performance rating, making her ineligible for promotion.
- During September and October 2010, Ms. Galea attended an 8-week program at Harvard, supported by Wal-Mart. When she returned to Wal-Mart Canada head office on November 1, her personal effects had been removed from her office and her phone disconnected.
- On November 9, Wal-Mart Canada offered her a choice: demotion on unfavourable terms or severance.
- Starting November 19, Wal-Mart Canada paid Ms. Galea severance on an ongoing, salary continuance basis (rather than in a lump sum). Eleven and a half months later, the payments stopped abruptly without explanation.
Ms. Galea then sued Wal-Mart Canada for the remaining severance owed under her non-competition agreement (12+ months), and moral and punitive damages. All her claims were successful and, as noted above, she was awarded $250,000 in moral damages (for Wal-Mart Canada’s treatment of her both pre- and post-termination) and $500,000 in punitives. Here’s why:
During Ms. Galea’s final 10 months of employment:
- She “was made to suffer repeated humiliation, starting with the announcement of her re-assignment from Vice-President, General Merchandising to that of a roving vice president of little substance”.
- She was placed in a “not currently promotable category”.
- Wal-Mart Canada’s conduct was misleading at best, and dishonest at worst, as only Wal-Mart knew that Ms. Galea’s career was over long before she was actually dismissed.
- Wal-Mart Canada kept Ms. Galea in suspended animation, which was unduly insensitive conduct.
After Ms. Galea’s dismissal:
- Wal-Mart Canada stopped paying Ms. Galea the severance she was entitled to, with no explanation.
- During the litigation, Wal-Mart Canada was either indifferent towards Ms. Galea or engaged in delay tactics, causing her mental distress that exceeded the normal stress and hurt feelings that accompany a dismissal.
- Wal-Mart Canada’s conduct before and since dismissal was “deplorable”.
- Wal-Mart Canada did not just set Ms. Galea up to fail – they “built her up, only to let her down that much more”.
- As the largest retail company in the world, having earned $135 billion worldwide in 2016, any award within recognized limits in Canada would be affordable for Wal-Mart Canada.
- The fact that the decisions and conduct in this case played out at the highest executive level within Canada, a higher award of punitive damages was necessary to chastise and deter Wal-Mart Canada from conducting itself in a similar fashion against employees in the future.
- While awards of punitive damages are rare, a court may award them when an employer’s egregious conduct warrants both punishment and deterrence.
- The court may consider an employer’s conduct during litigation when calculating moral damages.
- Higher awards may be warranted where the dismissed employee held a senior executive role with the organization.
- Treating an employee fairly and honestly during the course of dismissal is not just the right thing to do, it’s better for the bottom line.