This decision from the Ontario Court of Appeal addresses a wrongful dismissal claim brought by Drago Krmpotic against his former employers, Thunder Bay Electronics Limited (TBEL) and Hill Street Financial Services Inc. (collectively, the “appellants”). Krmpotic, a long-term employee, was terminated without cause after nearly 30 years of service. The court upheld the trial judge’s decision, awarding Krmpotic damages for wrongful dismissal, aggravated damages for the manner of his termination, and holding both employers jointly and severally liable. This decision has significant implications for employers, particularly regarding mitigation, aggravated damages, and joint liability in wrongful dismissal cases.

Key Facts

1. Background:
   • Drago Krmpotic worked for TBEL and Hill Street for nearly 30 years, primarily as a Building Maintenance Supervisor. His role involved physically demanding tasks, including climbing transmission towers and performing heavy labor.
   • Krmpotic suffered multiple workplace injuries, culminating in back surgery in April 2016. He returned to work on June 13, 2016, but was terminated without cause just hours later.
   • At termination, Krmpotic was 59 years old and earning an annual salary of approximately $72,864. The appellants offered him a severance package of 16 months’ salary, which he refused, opting to sue for wrongful dismissal.
2. Claims:
   • Krmpotic sought damages for wrongful dismissal, including:
     • Reasonable notice of 24 months.
     • Aggravated damages for mental distress caused by the manner of his termination.
   • The trial judge awarded Krmpotic 24 months’ notice (less the 16 months already paid) and $50,000 in aggravated damages. The appellants were held jointly and severally liable.
3. Appeal:
   • The appellants appealed, arguing that:
     • Krmpotic failed to mitigate his damages.
     • The trial judge erred in awarding aggravated damages.
     • The trial judge erred in holding both employers jointly and severally liable.

Court of Appeal’s Analysis and Decision

1. Mitigation:
   • The appellants argued that Krmpotic failed to mitigate his damages by not seeking comparable employment during the notice period. They claimed the trial judge erred in finding that Krmpotic was physically incapable of working due to his back surgery and injuries.
   • The court upheld the trial judge’s finding that Krmpotic was unable to mitigate due to physical incapacity. The trial judge relied on evidence from Krmpotic, his wife, and his son, as well as Krmpotic’s failed attempt to work for his son’s renovation business in November 2017. The court found no palpable and overriding error in this conclusion.
   • The court rejected the appellants’ argument that medical evidence was required to prove physical incapacity, noting that Krmpotic’s medical history and the testimony of his family provided sufficient evidence.
2. Aggravated Damages:
   • The appellants argued that the trial judge erred in awarding aggravated damages because Krmpotic did not provide medical evidence of mental distress caused by the termination.
   • The court clarified that aggravated damages are available when an employer breaches its duty of good faith during the termination process, causing harm beyond normal distress and hurt feelings. The trial judge found that the appellants’ conduct during termination was “untruthful, misleading, and unduly insensitive,” breaching their duty of good faith.
   • The court upheld the $50,000 award for aggravated damages, noting that Krmpotic suffered anxiety, depression, and other mental distress as a result of the manner of his termination.
3. Joint and Several Liability:
   • The appellants argued that only TBEL, not Hill Street, should be held liable for damages, as TBEL was Krmpotic’s employer at termination.
   • The court rejected this argument, finding that both TBEL and Hill Street employed Krmpotic throughout his tenure. The trial judge relied on evidence that Krmpotic’s employment was “transferred” between the two companies multiple times, and the Settlement Memorandum referred to both entities as his employers.
   • The court upheld the trial judge’s decision to hold both employers jointly and severally liable.

Impact on Employers

1. Mitigation and Physical Incapacity:
   • Employers must be cautious when arguing that an employee failed to mitigate damages, particularly if the employee has a documented history of physical injuries or medical conditions. Courts may accept non-medical evidence (e.g., testimony from the employee and family) to establish incapacity.
   • Employers should consider the employee’s physical and mental health when assessing mitigation efforts, especially in cases involving long-term employees with physically demanding roles.
2. Aggravated Damages:
   • This decision reinforces that employers have a duty of good faith during the termination process. Conduct that is “untruthful, misleading, or unduly insensitive” can lead to aggravated damages, even in the absence of medical evidence of mental distress.
   • Employers should ensure that termination meetings are conducted with honesty, transparency, and sensitivity to avoid claims for aggravated damages.
3. Joint and Several Liability:
   • Employers operating under related entities or common ownership should be aware that courts may hold them jointly and severally liable for wrongful dismissal claims if the employee’s work benefits both entities.
   • Employers should clearly define employment relationships in contracts and avoid transferring employees between entities without proper documentation.
4. Reasonable Notice Periods:
   • The court upheld a 24-month notice period for a 59-year-old employee with nearly 30 years of service, reinforcing that long-term employees in physically demanding roles are entitled to significant notice periods.
   • Employers should carefully assess the Bardal factors (age, length of service, position, and availability of similar employment) when determining notice periods.
5. Settlement Offers:
   • The court referenced the Settlement Memorandum offered by the appellants, which listed both TBEL and Hill Street as employers. Employers should ensure that settlement agreements accurately reflect the employment relationship to avoid disputes over liability.

Conclusion

The Krmpotic v. Thunder Bay Electronics Limited decision highlights the importance of employers acting in good faith during the termination process and considering the physical and mental health of employees when assessing mitigation efforts. The case also underscores the potential for joint and several liability in cases involving related employers. Employers should ensure that termination processes are conducted with sensitivity and transparency, and that employment relationships are clearly documented to minimize legal risks.