Bad Faith Damages – A Case Analysis

In a recent decision of the Alberta Provincial Court in Locke and Chandos Construction Ltd., a number of interesting legal issues were addressed.

Mr. Locke was employed as a Construction Superintendent with Chandos Constructions Ltd. (“Chandos”). Mr. Locke was 63 years of age and had been involved in the construction industry for over 35 years. After a brief period of unemployment, Mr. Locke found employment with Chandos as a Superintendent renovating and constructing a school commencing in early April 2002. Mr. Locke was responsible for completing the 7 million dollar project and was Chandos’ main representative at the job site. After the project was completed approximately one year later, Mr. Locke was asked to be a Site Superintendent for a theatre complex in Lethbridge, Alberta necessitating a move to the Lethbridge area. Mr. Locke did not receive a change in his remuneration although he did receive a living allowance as a result of the move.

Mr. Locke was introduced to co-workers at the new job site on September 2, 2003. By that time, Mr. Locke had moved to Lethbridge and had incurred liability with respect to a residential lease.

Approximately one week after commencing employment at the new site, Mr. Locke was terminated for “not being capable of doing the job” and replaced with a new Superintendent. Mr. Locke was not provided with any severance or offer of other work. Mr. Locke was replaced with a Superintendent with greater seniority with Chandos and who had just finished another project.

Chandos relied upon custom or usage in the industry for the proposition that it had no obligation to provide Mr. Locke with any notice. The Court held that in order for custom or usage to be binding it “must be notorious, certain and reasonable and not contrary to the law”. The Court held that the employer showed no evidence of custom or usage in respect of (i) the right of termination without notice or compensation; or (ii) even as to how such custom/usage might impact reasonable notice. The Court relied upon the common law principle that reasonable notice of the termination of employment must apply. The Court then went through an analysis of the amount of notice that Mr. Locke would be entitled based on the standard factors, including age – 63 and length of service – 16 months. The Court held that notwithstanding the short duration of employment, the Plaintiff was a senior employee and entitled to six months’ pay. The Court further added one additional month’ notice on account of bad faith conduct of the employer. The Court relied upon the following bad faith conduct:

“it is clear that Mr. Locke was dismissed because the company wished to have another employee take over the superintendent’s position that he had been given on the Lethbridge theatre project. The company was not forthright in this regard and was misleading when, in advising the Plaintiff of his dismissal, they told him that he was being dismissed because, “he was capable of doing the job”.

The Court also stated:

“The Defendant company was insensitive to the fact that they had only days before placed the Defendant in the position, introduced him as the superintendent of the job, and had otherwise given him their full confidence. They were insensitive to the fact that dismissing him on the basis of being incapable of performing the job, which was not the basis at all, could clearly impair his ability to get a job. Indeed, the Plaintiff was afraid to put on his resume his dismissal, as he feared that could impact his ability to find similar employment…

It is of further note that the Plaintiff’s dismissal was abrupt, without any warning or indication to him and without regard to the fact that he had been required to move to Lethbridge by the Defendant company, when he had been appointed to handle the Lethbridge project. In this regard, he had entered into a one year residential lease and the Defendant company had no regard whatsoever for the fact that he would be liable under the terms of this lease even after his termination of employment.

Further indicative of the Defendant company’s bad faith is the fact that although it was clear that they had no grounds for dismissal, instead of giving the Plaintiff even nominal notice, they chose to proceed on the basis that they could dismiss without any notice whatsoever, regardless of whether that was fair or not”.

This decision emphasizes two paramount principles of employment law. First, an employee is entitled to reasonable notice of the termination of employment, save and except where the parties clearly contracted to the contrary. This Court had very little patience for the company’s defence based on custom or usage where no evidence was available to substantiate such proposition. Second, this case demonstrates the Court’s requirement that a company act in good faith in the manner of termination.