Aggravated and Punitive Damages
Update by Erin Brandt, Cofounder and Angie Sung, Lawyer
In Chu v China Southern Airlines Company Limited, 2023 BCSC 21 (“Chu”), the British Columbia Supreme Court awarded Mr. Chu $150,000 in aggravated and punitive damages, in addition to severance pay following his wrongful dismissal from China Southern Airlines Company (“CSA”). These high damages were based on the employer’s reprehensible treatment of Mr. Chu with respect to CSA’s unfounded allegations that Mr. Chu engaged in serious misconduct, CSA’s failed claim that there was just cause to immediately dismiss Mr. Chu, and CSA’s bad faith conduct during litigation.
Background
Mr. Chu worked for CSA for approximately 10 years. He started with CSA on an informal basis as a contractor, and over time became a full-time employee as the Marketing and Business Development Manager. In this role, Mr. Chu led CSA’s business initiatives in Canada, liaising with CSA’s head office in China.
In February 2018, after a change in management, CSA began a broad and sustained pattern of bad faith and abusive conduct towards Mr. Chu designed to set him up for failure, manufacture just cause for his dismissal and/or induce him to resign. This campaign included:
Demoting Mr. Chu to entry-level, front-line service positions that he wasn’t trained for, with a 25% pay reduction;
Unfairly disciplining Mr. Chu, threatening termination and public reprimands including yelling and throwing a computer mouse at Mr. Chu; and
Compelling Mr. Chu to sign letters of reprimand he did not agree with.
On February 1, 2019, CSA terminated Mr. Chu’s employment with cause, alleging “time theft” and “completely unacceptable performance.” After Mr. Chu filed a legal claim against CSA for wrongful dismissal, CSA made far more serious and extensive allegations in its Response to Civil Claim than it had made in its termination letter. Some of the more egregious allegations concerned dishonesty, fraud, theft, conspiracy and sexual harassment.
As the case approached a court hearing, CSA dropped their most serious allegations against Mr. Chu but nevertheless continued to assert just cause.
Decision
The Court found that CSA failed to establish just cause for Mr. Chu’s dismissal, as all its allegations were entirely unsupported by evidence or lacking merit. As such, Mr. Chu was entitled to damages for wrongful dismissal.
The Court reviewed the Bardal factors, and in particular Mr. Chu’s:
Age at the time of dismissal (68);
Long tenure of more than 8 years – recognizing his additional 3 years as a contractor prior to becoming a full-time employee;
Senior management role prior to his demotions and specialized expertise in air travel and tourism focused on the Chinese and Canadian markets; and
The limited availability of reasonable comparable employment, particularly considering the Covid-19 pandemic which impacted travel between Canada and China.
Mr. Chu was ultimately awarded 20 months of severance based on his income at the time of his dismissal for a total of $58,800 – though this amount was reduced by $747 on account of income Mr. Chu earned moving boxes in 2020.
Most significant about this case is the high awards for aggravated and punitive damages.
The Court awarded Mr. Chu $50,000 in aggravated damages as a result of the humiliating and degrading manner that CSA sought to terminate Mr. Chu without notice or severance, including:
Its duplicitous and unfair dealings with Mr. Chu starting in 2018;
Mr. Chu’s exceptional vulnerability given his age and limited work opportunities;
CSA’s refusal to provide a Record of Employment, contrary to legal requirements; and
The numerous, very serious and false allegations about Mr. Chu that CSA included in its Response to Civil Claim.
The Court awarded Mr. Chu $100,000 in punitive damages, finding that in addition to the above, CSA’s bad faith conduct continued through the litigation as an “unbroken course” of misconduct, including:
Requiring Mr. Chu to bring multiple pre-trial applications to enforce CSA’s compliance with its obligations as a litigant – for example, relating to document disclosure and attendance at examinations for discovery;
Causing substantial delays in the proceedings; and
Failing to comply with a court order regarding costs.
The Court concluded that as the severance pay and aggravated damage awards were modest, an additional award of punitive damages was necessary to achieve the objectives of retribution, deterrence and denunciation. Since CSA is a very large corporation with significant profits, only a substantial monetary award would have the required “sting” to punish CSA’s cruel and insensitive behaviour.
Key Take Away for Employees
The employer has the burden of proving that it has just cause to immediately dismiss an employee without notice or severance. If an employer fails to prove just cause, the dismissed employee will usually be entitled to severance pay. In addition, if an employer behaves egregiously leading up to, during and following the dismissal, a court can award additional compensation in the form of aggravated or punitive damages, which depending on the circumstances, can be quite significant.
Key Take Away for Employers
Employers should seek legal advice before dismissing an employee for just cause because there can be significant financial consequences to getting this wrong. Further, the especially terrible behaviour of CSA in this case and subsequent large damage awards to Mr. Chu provide a good reminder that it is both ethically and financially responsible to behave in good faith in the manner of dismissing an employee.
