Ontario Court of Appeal affirms Employee’s claim for Aggravated/Moral Damages despite lack of Expert Medical Evidence
Last year, the Ontario Court of Appeal released its decision in Krmpotic v Thunder Bay Electronics Limited,[1] which addressed an employee’s claims for aggravated/moral damages in the wrongful dismissal context.
After working full-time for over 30 years as a Building Maintenance Supervisor, Mr. Krmpotic was terminated by his employer without cause. The termination, which occurred just hours after Mr. Krmpotic returned from medical leave due to work-related injuries, was accompanied with a severance offer of 16 months’ salary. Mr. Krmpotic rejected this offer and commenced a wrongful dismissal action, which included claims for mental distress and aggravated/moral damages.
At trial, the employer argued that the reasonable notice period ought to be reduced on the basis that Mr. Krmpotic failed to mitigate his damages. The trial judge rejected this, noting that when Mr. Krmpotic’s employment was terminated, he was 59 years of age, recovering from back surgery, and significantly limited in his ability to perform the physical labour that his occupation demanded. Based on the evidence from Mr. Krmpotic, his wife, and his son, the trial judge was satisfied that Mr. Krmpotic was “unable to perform any meaningful physical labour due to his physical condition” during the reasonable notice period. Accordingly, Mr. Krmpotic was awarded 24 months’ pay based on 30 years of service.
However, the trial judge dismissed Mr. Krmpotic’s claim for mental distress on the basis that he failed to provide the court with expert medical evidence confirming that the manner in which his employment was terminated resulted in mental distress. Nonetheless, the trial judge awarded Mr. Krmpotic $50,000.00 for aggravated/moral damages due to the employer’s conduct on termination, which the trial judge described as “the antithesis of an employer’s duty” to be candid, reasonable, honest, and forthright, and to “refrain from engaging in conduct that is unfair or in bad faith by being untruthful, misleading, or unduly sensitive”.
On appeal, the employer argued the trial judge erred in concluding that Mr. Krmpotic was unable to mitigate during the reasonable notice period due to the absence of medical evidence. The employer also disputed the award of aggravated/moral damages on the basis that Mr. Krmpotic’s claim for mental distress was unsuccessful.
The Court upheld the trial judge’s decision and dismissed the employer’s argument that physical incapacity could only be established through expert medical evidence. The evidence before the trial judge incorporated details regarding Mr. Krmpotic’s medical history, which included numerous knee problems and four different back injuries sustained at work, ultimately resulting in his need for back surgery. Mr. Krmpotic, his wife, and his son, all provided evidence at trial regarding his physical limitations. The Court held that the trial judge did not err in accepting this evidence.
The Court further rejected the employer’s claim that aggravated/moral damages require expert medical evidence to demonstrate that the dismissal led to mental distress. On this issue, the Court noted:
[34] Mental distress is a broad concept. It includes a diagnosable psychological condition arising from the manner of dismissal but is not limited to that. There is a spectrum along which a person can suffer mental distress as a result of the manner of dismissal. At one end is the person who suffers the normal distress and hurt feelings resulting from dismissal, which are not compensable damages. At the other end of the spectrum is the person who suffers from a diagnosable psychological condition as a result of the manner of dismissal. In between those two end points, there is a spectrum along which the manner of dismissal has caused mental distress that does not reach the level of diagnosable psychological injury.
The Court ultimately agreed with the trial judge’s assessment, which considered whether (1) the employer’s conduct during the course of termination amounted to a breach of their duty of honest performance; and (2) if so, whether Mr. Krmpotic suffered harm (beyond normal distress and hurt feelings arising from dismissal), as a result of the breach. The Court determined that it was open to the trial judge to conclude that both had occurred, and as such, upheld the aggravated/moral damages award.
This case illustrates the importance for employers to be careful in the way they terminate an employee. Courts will analyze an employer’s actions on termination and will award serious penalties for conduct it determines to be unfair or in bad faith. For employees, this case serves as a departure from the long-held notion that to be successful in a claim for aggravated/moral damages, evidence of a confirmable illness must be demonstrated.
[1] 2024 ONCA 332.