Severance liability, bad faith damages result of employer’s ambiguous standards (The Lawyer’s Daily)

(This article originally appeared in the July 6, 2017 issue of The Lawyers Daily.)

On May 1, 2017, the B.C. Supreme Court awarded our client, a spa worker, $15,000 in aggravated/bad faith damages for the manner in which she was treated by her employer.

Cottrill v. Utopia Day Spas and Salons Ltd. 2017 BCSC 704, involved Skincare Therapist and single mother, Jennifer Cottrill, who was fired for alleged just cause after 11 years’ employment with the defendant.

In early 2015, when one of Spa Utopia’s managers left the company, the senior management team looked to internal candidates to fill the vacancy. During the process, the company’s president was told that three employees, including Cottrill, were underperforming. Notwithstanding that the departing manager had not raised concerns about her performance, the Spa then went back over Cottrill’s personnel file and issued her a “termination notice” in March of 2015.

In the notice, Cottrill was told that she had three months to improve her performance and show two “successful” months, or her last day would be June 12, 2015, although termination could take place before that date.

During the three-month assessment period, Spa Utopia provided our client with three, one-hour coaching sessions with the new department head. Cottrill worked very hard to improve as she wanted to keep her position. Spa Utopia’s yearly financial performance spreadsheet confirmed that her performance did increase and she met the criteria for March/April and April/May of 2015. However, the spreadsheet noted that she was not “successful” for those months.

Despite her objective improvements, Spa Utopia assessed Cottrill’s “affect” at the coaching sessions and felt that she was not going to improve. Spa Utopia did not even record Cottrill’s financial performance for the final month of her assessment period.

At the end of the three months, Spa Utopia dismissed Cottrill alleging just cause.

The trial judge held that Spa Utopia did not have cause to dismiss Cottrill as it failed to give her a fair and reasonable opportunity to meet the expectations set out in the “termination letter.”

The standards required of Cottrill were found to be ambiguous. The letter set out “an unreasonable and unfair standard,” and both it and the company’s policies and procedures failed to provide adequate guidance to Cottrill.

Justice Harris noted that the coaching was performed by someone who knew management’s concerns in advance and who had no management experience or objective criteria to apply. Cottrill’s improved performance actually contradicted the Spa’s allegations about her poor attitude, lack of motivation, or complacency.

As such, Cottrill was entitled to her contractual severance.

In addition, the court awarded Cottrill $15,000 in bad faith/aggravated damages because Spa Utopia breached its duty of good faith in the manner in which it dismissed her. In particular:

  • Spa Utopia reviewed her personnel file and performance without any recent performance issues;
  • It held her to standards not previously required of her, and responded to perceived shortcomings disproportionately by dismissing her;
  • It promised that if she improved in two of three months she could keep her job. However, after doing just that, it fired her;
  • Her performance improved significantly and she met the criteria for the first two of the three months. However, Spa Utopia then alleged that she failed because of her attitude which was unsupported by anything other than an “impressionistic assessment”;
  • Spa Utopia was not candid about the lack of documentation concerning Cottrill’s performance as it failed to record her performance over the final month;
  • The trial judge found it likely that the company decided to terminate Cottrill before the end of the three months, and without considering her last month’s performance or giving her a chance to address concerns about her attitude;
  • She was ”… lulled into believing that her performance would be fairly considered” but this was not done; and
  • Ultimately, Spa Utopia’s lack of good faith and its unfairness in the manner of dismissal caused Cottrill emotional distress beyond that from the fact of the dismissal.

This case is illustrative for the following points:

  • Employers must give employees clear and unambiguous criteria to meet, and a fair opportunity to do so;
  • Employers will be bound to the actions (or inaction) of its employees. For example, employees are entitled to rely on the actions and feedback from their managers, and employers are bound by the way in which their managers manage staff even if they let certain issues go; and
  • Employers must be candid, fair and transparent when assessing performance and dismissing employees. Failure to do so can result in severance liability and additional damages.

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