A recent case out of Calgary, Karmel v. Calgary Jewish Academy (2015 ABQB 731), presents some valuable lessons for Alberta employers. This case involves a wrongful dismissal lawsuit by a terminated School Principal, Mr. Karmel, who was alleged to have been disobedient.  Ultimately, the Court found that the School did not meet its burden in proving just cause and that it pursued “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 contact. This was a wrongful dismissal carried out in bad faith”.  Mr. Karmel had a 5 year fixed term contract (without an early exit clause), which meant that he was entitled to the value of the remainder of his contract.

While the facts are interesting, they are not particularly novel – there are many cases where employers have angered judges by alleging cause and then failing to prove it. What is more interesting is paragraphs 89-103 of the decision where the Court also awarded Mr. Karmel $200,000 in “aggravated damages” despite the fact that it appears that he did not present any evidence (other than his own testimony) that he actually suffered mental distress.  Obviously the Court was highly displeased with the Employer’s behavior and felt it acted in bad faith.  It cited 3 well known Supreme Court of Canada cases (Wallace v. United, Keays v. Honda, and Bhasin v. Hrynew) as authorities for the aggravated damage award.

We understand that this case is being appealed and think that it is the perfect case for the Alberta Court of Appeal to clarify the law in this area and answer the following questions:

  1. Was the Wallace v. United analysis replaced by Keays v. Honda? We had always thought so but this case casts doubt on that view.
  2. Given Keays v. Honda, should an employee be awarded a significant damage award when they do not present any objective medical evidence that they have actually suffered mental distress?
  3. How do Bhasin v. Hrynew and Keays v. Honda work together? If an employer acts in bad faith, is an employee (because of the Bhasin v. Hrynew analysis), no longer required to prove mental distress to receive a significant aggravated damages award?  This would seem to take us back to the Wallace era.

We will monitor the outcome of the appeal. For now, this case reaffirms 2 age old lessons that Alberta employers should remember: Don’t allege cause unless you can prove it.  And remember that, barring exceptional cases, you won’t prove it.  Also don’t hire an employee on a 5 year fixed term contract without an early exit clause!