Just cause allegations must be righteous: $125K in damages for false claims

In May the Superior Court of Justice for Ontario released its decision in Ruston v. Keddco Mfg. (2011) Ltd.. While the award of 19.5 months’ notice to an 11-year employee is noteworthy, if not groundbreaking – the plaintiff was the President of the company after all – the Court’s reasoning and ruling with respect to the company’s just cause allegations certainly gives pause for employers. In dismissing both Keddco’s just cause allegations and its counterclaim, Justice Chiappetta determined that the company’s conduct was worthy of additional damages to the tune of $100,000 in punitive damages and $25,000 more in moral damages.

Mr. Ruston was originally hired as a sales representative for Keddco; however, when Keddco was purchased by Canerector Inc. in 2011, Mr. Ruston was promoted to the role of president of Keddco, working with and reporting to a liaison at Canerector. In 2014, Mr. Ruston began reporting directly to the daughter of Canerector’s owner, Ms. Hawkins; within a year she made the decision to fire him for cause, providing little or no detail as to the conduct on which that decision was based.

Within a month of losing his job, Mr. Ruston had filed his claim for wrongful dismissal – despite being warned on termination that if he sued the company would counterclaim for “significant damages”. Keddco’s response to the Claim was to allege just cause and counterclaim for $1,700,000 on the basis that:

• Mr. Ruston was dishonest to the point of committing civil fraud;
• Mr. Ruston’s dishonest/fraudulent conduct resulted in him being unjustly enriched; and
• Mr. Ruston breached his fiduciary duties to Keddco.

The Defence and Counterclaim was the first time Mr. Ruston learned of these allegations, or that such allegations were the basis for the termination of his employment.

In dismissing Keddco’s just-cause argument and all aspects of its Counterclaim, Justice Chiappetta took issue with various aspects of the company’s evidence, including:

• Despite initially having a list of 25 witnesses, at trial only 2 people testified on behalf of Keddco and none of the people who worked with the Plaintiff on either a daily basis or even a semi-regular basis were called;
• Ms. Hawkins answered questions only in the way that served the company’s narrative and was found to be less than credible;
• Further, Ms. Hawkins’s evidence on several key points relating to the serious allegations of fraud were either not corroborated or were seemingly contradicted by documentary evidence.

In all, Justice Chiappetta determined that the allegations of fraud and financial misrepresentation were constructed as a tactic to try and intimidate the plaintiff. In awarding Mr. Ruston $100,000 in punitive damages Justice Chiappetta found that almost all of Keddco’s conduct from the moment was intended to intimidate and dissuade him from bringing a wrongful dismissal lawsuit – from the unnecessary complications in the litigation process caused by Keddco’s indifference to the total lack of evidence with respect to the serious allegations in the Counterclaim, Justice Chiappetta found that “the counter-claim was merely a tactic employed by the defendant to induce the plaintiff to drop his claim.”

Similarly, the Court found that the conduct of Ms. Hawkins in terminating Mr. Ruston’s employment entitled him to moral damages, finding:

1. The defendant failed to be candid with the plaintiff during the termination meeting in terms of the reasons for his termination for cause.
2. Hawkins acknowledged that facing a claim of financial fraud would negatively affect the plaintiff stating “I mean going through a lawsuit is probably very stressful and costly.”
3. The defendant made personal attacks against the plaintiff in its pleading and only dropped such allegations at the end of the trial after it was brought to its attention that no evidence was led to substantiate the allegations.
4. The defendant publically made unfounded allegations of financial fraud as against the plaintiff. These allegations will follow him on his career path for the rest of his life.
5. The plaintiff’s evidence was that the termination strongly affected him in that it has been “devastating” and “very stressful” and “weighs on you a lot.”

At the end of the day, this case sends a very strong message to employers: just cause is not a tactic to better position the employer in wrongful dismissal litigation. This is not to say that just cause terminations cannot be effected by employers; rather, before taking such action, consult with the team at CCPartners to determine whether you have a valid “just cause” case or whether a different approach to termination might be warranted instead.

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