2010 ABCA 25115

In the recent case from the Alberta Court of Appeal, the Court had the task of determining whether a unique award of damages should stand. The award was one of two made to the Plaintiff Soost, who had been dismissed by the Appellant without cause. The first of the two awards was $600,000 pay in lieu of notice, and was not at issue in the appeal. The second award of $1.6 million dollars was given as compensation for the “present capital value of future income”. Soost alleged Merrill Lynch fired him with a view to obtaining his clientele. The second award was compensation for this fact.

Writing for the Alberta Court of Appeal, Justice Côté summarised the law relating to damages that result from the dismissal of an employee. Under a standard employment contract each party retains the right to terminate the employment relationship, with or without cause. Two requirements apply to termination: the termination must be done in good faith, and reasonable notice must be provided to the other party. In the event that notice is not given, an employer dismissing an employee will be required to provide compensation in lieu of notice.

Côté examined the case law relating to damages other than those resulting from compensation in lieu of notice. These alternative damages were recognized by the Supreme Court of Canada in Keays v. Honda Can.16. When an employer conducts a dismissal through means that are unduly harsh or insensitive Honda damages may be available. Côté uses some examples to illustrate when such an award would be appropriate: “a boss who tells all the fellow employees… that the dismissed employee is stupid or incompetent… [or] dismissing an employee within a day or two of a daughter’s wedding, or of the death of a parent.”17 The circumstances required to award such damages are akin to “intent, malice, or blatant disregard for the employee.”18 Finally, Honda damages are not punitive in nature, they are intended to be compensatory.

Soost argued that his termination was perpetrated in bad faith, in a manner that amounted to extremely unfair competition. Soost also argued that Merrill Lynch had conducted the termination with a view to obtaining his clientele. The upshot of Soost’s argument was that he should be compensated for the Appellant’s unfair practices which negatively impacted his future income. Unfortunately for Soost, the facts did not support this assertion. His dismissal had been conducted fairly and it was well within the Appellant’s rights to compete for Soost’s clientele once the dismissal had taken place.

Côté noted that the damages awarded by the trial judge could not fall within the Scope of Keays damages. The employer had a good faith reason for dismissing Soost as he had breached the terms of his employment contract. Côté concluded that the trial judge mistakenly awarded Soost the $1.6 million award under the pre-text of Honda damages, having intended them to compensate Soost for the “stigma of dismissal” and the effect on his future income. Côté points out that such an award contradicts the right of employees and employers to freely terminate the employment contract.

The true effect of the second damage award was to doubly compensate Soost for lack of notice. The dismissal was not conducted improperly, and payment in lieu of notice was given at trial in the form of the first award. The loss of the present value of Soost’s future income was in effect giving Soost a second award for payment in lieu of notice, equivalent to 22/3 his annual remuneration. As there was no justification for such an award, the Court of Appeal overturned the decision of the trial judge in that regard.