In a recent Ontario case, an employer’s sole director was found personally liable for $75,000 in aggravated damages for the manner in which he treated and dismissed an employee under the oppression remedy.
What Happened?
The employee was employed by the employer corporation (the “employer”) from July 2009 until her termination on March 12, 2016. She earned a salary of $90,000 until her salary was reduced to $60,000 in 2015 as a temporary measure to help the employer through the off-season.
The employer was a company that specialized in conducting vehicle and heavy equipment auction sales. The employer corporation had one sole director (the “director”), who also acted as its president.
From 2009 until November 26, 2015, the employee and the director were in a common law relationship and have three children together.
The employee alleged that on March 9, 2016, the director wrongfully terminated her employment and withheld her wages. She claimed that the termination was unrelated to her work, but directly related to their separation. The employee alleged that she was not paid the wages owing to her and, as a result, she became a creditor of the employer.
The employer ceased operation in 2017, and all of its assets were transferred to a related company.
The employee brought a motion for an order of default judgment and an order imposing personal liability against the director as an oppression remedy pursuant to s. 248 of the Ontario Business Corporations Act(the “OBCA”). Her statement of claim asked for $256,355 for unpaid wages, unpaid vacation pay, damages for wrongful dismissal and aggravated and punitive damages.
The Decision
After reviewing the relevant legal principles, the court found that it was appropriate to pierce the corporate veil under s. 248 of the OBCA and impose personal liability on the director.
It found that the employee became a creditor of the employer in March 2016 when the director withheld her wages from the employer’s payroll. The employee brought an action to recover this debt, and the director caused the employer to cease operations and transfer all of its assets to a related company in order to leave it without assets to respond to a possible judgment in this action. The court found that these actions qualified as oppressive conduct under s. 248 of the OBCA.
The court stated that, as the sole director of the employer, the director can be held personally liable for oppressive action. It found that the facts demonstrated that the director acted for reasons of personal animus against the employee and that the reasons were unrelated to her employment or to her entitlement to wages and benefits.
Ultimately, the court found that the director acted in bad faith, using his control of the employer corporation to advance his personal financial interest, and to punish the employee and gain leverage in their family law dispute. It found such conduct directly attributable to the director and, as the sole director, it found him personally liable.
Damages
At the outset, the court found that the employee was owed basic wages, statutory holiday pay, vacation pay and pay in lieu of notice. It awarded her $2,582 for unpaid past wages, $13,776 for accrued vacation benefits and $90,000 for pay in lieu of reasonable notice.
The court then turned to the employee’s claim for $75,000 for aggravated damages for the manner in which the director terminated her employment.
The court found that the director’s handling of the employee’s termination was unfair and in bad faith. The director had made a false allegation that the employee was “considered having quit” to avoid having to pay her severance for dismissing her without reasonable notice. The court described the director’s conduct as unfair and appeared to be retaliation for the issues raised in the family law dispute.
The court concluded that it was a proper case for aggravated damages and made an order for $75,000 for aggravated damages against the director.
The court dismissed the employee’s claim for punitive damages, finding that the imposition of personal liability on the director was a sufficient penalty for the oppressive conduct complained of.
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At Campbell Bader LLP, our Mississauga employment lawyers have been representing non-unionized employees in workplace disputes since 1999. We know that such disputes can be very stressful and can get emotional quickly. We seek to simplify the law so that you understand your options and make informed decisions. We leverage our extensive experience advising employers to provide insightful guidance to employees who are facing challenging circumstances at work. We work hard to protect you.
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