Failure to Launch: A Cautionary Tale for Employers Arising from Chu v. China Southern Airlines Co. (c.o.b. China Southern Airlines), 2023 BCSC 21

This article was prepared with the assistance of articling student Daniel Hsieh.

The British Columbia Supreme Court recently issued a scathing decision that serves as a warning to all employers about what not to do when purporting to terminate an employee for just cause.

Overall, the employer’s actions attracted $150,000 in aggravated, punitive and bad faith damages, approximately three times the value of the wrongful dismissal damages (i.e. severance) awarded.

Facts

The 68-year-old plaintiff had worked for China Southern Airlines (“CSA”) since 2008 as a Marketing and Business Development Manager. During his tenure, he was instrumental in building CSA’s reputation and, at least prior to 2017, had never been the subject of complaints about his work.

However, starting in 2017, a new General Manager for the employer “embarked upon a campaign designed to manufacture cause for dismissal or induce the plaintiff to resign”, which included:

• issuing reprimands and threatening dismissal for seemingly minor issues;
• unilaterally demoting the plaintiff (on two occasions); and
• subjecting the plaintiff to various actions aimed at manufacturing just cause or compelling his resignation.

His employment was terminated for just cause on February 1, 2019. At trial, the plaintiff asserted that there was no cause for termination, while the defendant took the position that the plaintiff was incompetent and relied on a cause defence.

Cause or No Cause

The Court dismissed the defendant’s just cause argument, and in so doing highlighted the plaintiff’s long service and previous record of good performance, the steps that needed to be taken prior to terminating an employee for cause based on incompetence and the defendant’s failure to take those steps. The Court ultimately found that the defendant was merely dissatisfied with the plaintiff, and that mere dissatisfaction was insufficient to ground just cause for dismissal.

As CSA failed to establish just cause for dismissal without notice, the plaintiff was entitled to damages for wrongful dismissal. Given his Bardal factors, he was awarded a reasonable notice period of 20 months: a total of $58,800.

Damages

More notably, however, the Court awarded a significant amount of damages as a result of CSA’s actions.

In awarding $50,000 in aggravated damages, the Court found that, based on the degrading manner of his demotions, the public nature of the discipline and the fact that the conduct of his supervisors made the plaintiff feel humiliated, helpless and worried, the defendant had breached its duty of good faith and fair dealing.

In relation to punitive damages, which are awarded for “advertent wrongful acts that are so malicious and outrageous that they are deserving of punishment on their own”, the Court determined that CSA’s harsh, vindictive, reprehensible and malicious conduct, along with acting in bad faith in the litigation itself, warranted such an award. Examples of the defendant’s improper conducts included:

• making serious and false allegations in the pleadings that the defendant would have known would damage the plaintiff’s chances of obtaining alternative employment;
  denying the plaintiff was a Marketing and Business Development Manager at any point in his employment;
• forcing the plaintiff to file an application compelling CSA to produce a list of documents;
• filing to delay the proceedings to retain new counsel but then continuing the action self-represented;
• failing to provide the documents listed on its list of documents, thus requiring the plaintiff to bring another application to compel the production of such documents;
• acting uncooperatively in making arrangements for the plaintiff to examine CSA’s representative for discovery;
• failing to pay costs that were awarded at the trial management conference due to causing a substantial delay; and
• failing to produce evidence supporting their allegations of employees being disciplined.

Overall, the Court found this to be a pattern of conduct from a large corporation designed to stall and frustrate a highly vulnerable plaintiff.

Lessons for Employers

While the facts of this case are exceptional, there are nonetheless a number of lessons that can be drawn from the Court’s decision:

1. Incompetence leading to a just cause dismissal is a high bar to meet for employers to prove. To meet that bar, employers will need to establish a number of things including: (a) reasonable standards of performance; (b) that those standards were communicated; (c) that training, support and time to meet those standards was provided; (d) that the employee was warned of the consequences to meet those standards; and (e) ultimately that the employee failed to meet that standard.

2. Employers should recognize the risks involved in unilaterally demoting an employee along with reducing the employee’s salary. Not only could this amount a repudiation of the contract and a wrongful/constructive dismissal, but depending on the employer’s motivations in particular, it may form a basis for claims for damages.

3. Employers must deal with employees in and honest and good faith manner. Employers who try to fabricate cause cases or make a workplace untenable for employees are at risk of exposure to significant liability.

While every effort has been made to ensure accuracy in this article, you are urged to seek specific advice on matters of concern and not to rely solely on what is contained herein. The article is for general information purposes only and does not constitute legal advice.