What factors beyond the traditional Bardal factors are appropriate to consider when assessing reasonable notice? Under what factual circumstances are aggravated damages (in some cases referred to as Wallace or Honda damages) to be awarded in a wrongful termination situation? These questions are at the centre of the Ontario Court of Appeal’s recent decision in McNevan v. AmeriCredit Corp.,1 which suggests that the debate surrounding the assessment of damages for wrongful termination may be ongoing for some time to come.

The Ontario Court of Appeal decided that advance notification or prior feedback as to an employee’s performance is not a prerequisite to a dismissal without cause. The Court also re-confirmed that employers do not have a legal obligation to provide a reference letter or offer assistance in a job search to a terminated employee and that the request for a release in exchange for a severance package and some lack of care and expediency in handling an employee’s termination are not the type of employer conduct which will support a finding of aggravated damages.

Mr. McNevan was hired as a Vice President of Collections by AmeriCredit Corp., a U.S. based company providing automobile financing services, to work in its new Peterborough call centre. In the first year of his employment, Mr. McNevan revealed himself to be a dedicated and hard working employee who was well liked by his colleagues. He oversaw the work of approximately forty-five (45) to sixty (60) employees and the departments for which he was responsible were routinely successful in meeting their targets collecting delinquent loans.

The evidence adduced at trial established that AmeriCredit had a “corporate culture” of sharing information, promoting open communication and providing regular performance feedback to its employees.

Notwithstanding the positive features of Mr. McNevan’s performance, the company’s senior management made a determination that he was not suited for the position of Assistant Vice President given some aspects of his leadership style, the manner in which he ran departmental meetings, and his time management abilities. On the basis of this assessment, the Company decided to terminate Mr. McNevan’s employment and proceeded to do so on the date of Mr. McNevan’s first annual performance review. The company offered him three (3) months’ salary conditional on the execution of a release.

Mr. McNevan was never provided with specific reasons for his termination although he requested an explanation and asked to meet senior management for that purpose. Mr. McNevan declined the company’s package and brought an action against AmeriCredit for wrongful dismissal.

As a result of the termination of his employment, Mr. McNevan experienced considerable distress, and sought treatment for depression and sleeplessness. It took him two to three months to regain sufficient focus to deal with the administrative aspects of his termination and to begin his search for new employment. Exactly one year following his termination, he was able to secure a short term contract of employment with the City of Peterborough.

Mr. McNevan was successful in his wrongful dismissal suit against AmeriCredit and was awarded damages in lieu of notice equivalent to six months. The trial judge also concluded that AmeriCredit had demonstrated undue insensitivity in its manner of dismissal and on that basis awarded him six additional months, three for the company’s failure to warn him prior to his dismissal that his performance as a Vice President was problematic from the company’s perspective; and a further three months for AmeriCredit’s posttermination conduct which, according to the trial judge, revealed a lack of care and attention in finalizing the severance. The trial judge found that this was unacceptable performance for a wellstaffed Human Resources Department in a large company and that this course of conduct increased the level of indignity the employee experienced.

AmeriCredit appealed the trial judge’s judgment on several grounds, the main ones being: 1) the judge’s assessment of the length of the notice period; and 2) his decision to extend the base notice period on Wallace principles.2

AmeriCredit argued that it was inappropriate for the trial judge to have considered the company’s failure to advise Mr. McNevan of his performance shortcomings, and that notwithstanding this, the notice period was excessive in comparison with other cases involving similar facts.

With respect to the notice assessment, all three Court of Appeal Judges agreed that the six months award should not be disturbed, although for different reasons. Two of the three panel members determined that the trial judge had assessed the notice on “extended” Bardal factors. They determined that in addition to the four classic Bardal factors (character of employment, age of the employee, length of service and the availability of similar employment), the trial judge considered the fact that the employer had failed to warn Mr. McNevan about its performance concerns and that this had made it impossible for him to improve or change. The third panel member, Justice Juriansz, did not agree with the majority’s interpretation of the judge’s assessment of reasonable notice and noted that the trial judge referred to the failure to warn Mr. McNevan merely to support his finding that the company had suggested to Mr. McNevan, through communication and actions, that he could expect long term employment in the circumstances.

Although the Court of Appeal decided not to interfere with the reasonable notice period of six months, because it was within the acceptable range, albeit generous, the decision derives its significance from the Court’s conclusion that there exists no implied duty to warn or to provide feedback to an employee regarding performance issues in a without cause termination situation. Justice Epstein commented in this regard as follows:

“Given the company’s view that there was nothing Mr. McNevan could have done to correct his problems and salvage his position with the company, a warning would have accomplished nothing other than offer Mr. McNevan the false hope that he could take steps to avoid dismissal. Feedback would have been a charade – a potentially hurtful one”.

On the basis of its analysis of the notice issue, the Court of Appeal majority accepted AmeriCredit’s contention that the first three month extension of the notice, which was based on the company’s failure to warn Mr. McNevan of its perceived performance issues, amounted to a duplication of the general damages award and constituted an error in principle. In that context, the Court of Appeal confirmed that the failure to warn was not an appropriate factor to consider in the assessment of whether AmeriCredit’s behaviour was in bad faith. The Court of Appeal also determined that the trial judge had considered other inappropriate factors in awarding the first three month extension, specifically the company’s failure to provide a reference letter, the failure to offer assistance in a job search, and the fact that its three month termination offer was premised on the provision of a release by the employee.

The Court of Appeal took the view that the second three month Wallace extension, which pertained to the company’s posttermination actions, and had been characterized by the trial judge as highhanded and insensitive, was not appropriate. In doing so, it highlighted the fact that “some lack of care and expediency” in finalizing administrative aspects of a termination cannot be characterized as being high-handed or unduly insensitive. Finally, of note with respect to the aggravated damages, the Court of Appeal indicated that in the context of a wrongful dismissal action, the nature of any alleged bad faith on the employer’s part must be considered as a whole, along with its overall impact upon the employee, rather than being split up into discrete components.

The decision in McNevan v. AmeriCredit Corp offers some fresh insight for employers as to certain crucial aspects of employment termination, namely that:

  • employers are not under a legal obligation when effecting without cause terminations, to have previously warned employees of performance related issues which are not considered to be remediable;
  • as previously suggested by the Court of Appeal and other courts in the various provincial jurisdictions, employers are not under a legal requirement to provide letters of reference or to offer assistance to employees in their search for new employment when terminated (this is not to say however, that it might not be in an employer’s best interest, in appropriate circumstances, to extend such offers);
  • although evidence of bad faith and unfair dealings by an employer at termination will continue to justify claims for aggravated damages, an additional onus will be placed on the terminated employee to establish an entitlement to such damages through evidence of mental distress beyond normal levels; and
  • that errors or the inefficient processing of termination entitlements in the context of finalizing a severance do not rise to the level of highhandedness or callousness required to establish an entitlement to aggravated damages.