Defamation Of Employee Costs Employer $60,000

Defamation and Wrongful Dismissal 

by Michael V. Coyle, JD*

A  Nova Scotia employer was recently ordered to pay a wrongfully dismissed employee over $60,000 in damages, costs and interest for defamatory statements the employer made – including a statement made to EI about why they dismissed the employee. This comes on top of the employee’s reinstatement ordered by the Labour Standards Tribunal, with 18 months back pay.

The plaintiff was the Chief Bar Steward with a branch of the Royal Canadian Legion with over 11 years service. The employer believed that he had been selling draft beer at “Happy Hour prices” outside of Happy Hour, causing the employer to suffer a loss of profits on its bar sales. In the Legion’s view, that loss of revenue was tantamount to theft, so they fired him.

The employee first went to the Labour Standards Tribunal and won reinstatement, with 18 months lost wages, when the employer was unable to prove just cause for his dismissal. There was never any suggestion that the employee had personally gained in any way from his alleged misconduct. The employee then sued the employer for defamation in the Supreme Court.

The employer stated on the ROE that he was dismissed for “willful misconduct or criminal conduct”. When the employees appealed the denial of his EI benefits, the Legion wrote to EI that his conduct “may be considered fraudulent”. Further, at a branch general meeting, the Audit Committee chair reported that the fired employee had been involved in what they considered to be the “misappropriation of funds”. The word in the community was, as one witness put it, that the fired employee had been caught with his “hand in the cookie jar”.

The Court rejected the employer’s claim it had “qualified privilege’ in its statements to EI, saying that while the first statement on the ROE (“wilful or criminal misconduct”) may have been ambiguous (because it was a check-box on the ROE), there was nothing ambiguous about the second statement to EI that the employee’s actions “may be considered fraudulent”. The Court was not at all impressed with the weasel words “may be considered”.  As the judge bluntly put it: “This is a serious allegation, and the use of the word “may” does not, in my view, mitigate from the imputation of criminal conduct. The statement is defamatory.”

So too was the report on the matter given by the Audit Committee chair at the general meeting. In both cases the employer was either deliberately attacking the employee’s reputation for honesty and integrity by imputing criminal conduct, or it was being reckless about how such statements would be understood in the community. In either event, the statements were held to be defamatory.

The Court also pointedly rejected any suggestion that because the Legion is a non-profit body, it should receive special treatment in the Court. The Judge quoted authority that, “A non-profit or benevolent corporation is liable for its torts, including libel and slander, the same as any other corporation.” The same law applies, of course, to small businesses.

Analysis

This case reminds us that defamatory statements are judged, not merely by the words used, but also by what they imply about the person who is defamed. The law books are full of cases where people thought that by using clever wording they could avoid a defamation suit. The question is not merely “What words were used?”, rather the Court will also ask itself, “What would a reasonable person in the community think that those words really meant?”

This case also reminds us that employers should be very careful what they say about their reasons for termination. Some employers believe that taking an aggressive posture with EI is a good strategy. The theory is (and I’ve heard this many times, sometimes attributed to lawyers) that if they can prevent the fired employee from getting EI that will improve the employer’s position in a wrongful dismissal suit.

Some  employers believe, or are advised,  that clever wording like “may be considered” will shield them from the legal consequences of their statements.

On the other hand, the theory goes, if the employer takes a more objective stance with EI, that will simply encourage the employee to file a wrongful dismissal claim. That theory is misguided and this case shows that it can be very dangerous. I always remind employers that whether a former employee gets EI is a matter between that employee and the Government. The employer does not have to take a position on that matter and it is often very unwise, as this case shows us, for the employer to do so.

The truth is that statements of this nature made by employers are often simply emotional responses to the hurt feelings surrounding the dismissal. Some employers will even try to justify their aggressive statements to EI by saying that they have a “moral duty” to see that the fired employee is deprived of EI benefits.

Small business and community organizations are particularly prone to this thinking because of the highly personal nature of their employment relationships and the level of hurt feelings that naturally arise when things go wrong. Unfortunately, many employers do not get objective legal advice on terminations because they see no need to talk to a lawyer about somthing that seems so obvious to them. That can be a costly mistake.

This case demonstrates the importance of obtaining specialized legal advice, preferably before the termination. Legal advice should not be reserved for “doubtful” termination cases but, as this case shows, objective legal advice is just as important where the employer firmly believes that dismissal is justified.

Obviously, with the benefit of hindsight, the Legion branch should have known that it did not have legal grounds to dismiss the plaintiff in this case.  That would have avoided the whole long and expensive mess. It certainly should have been more cautious in its statements to EI and should never have made the statements it did attacking the employee’s honesty and integrity, even at a closed general meeting. They should have sought and heeded legal advice, even if it was not what they wanted to hear at that particular time.

The result of the case is that the fired employee is still working at the Legion, with 18 months back pay in his pocket, plus $60,000 in damages, interest and costs for defamation. The Legion, of course, had to bear its own legal costs throughout, both before the Labour Standards Tribunal and in the Supreme Court. My guess would be that, altogether, it probably cost the Legion something in the neighborhood of $100,000 or more.

For more information about this case and how it might apply in your personal situation, please contact me for advice.

*Michael Coyle is an experienced employment-labour relations lawyer and a neutral mediator and arbitrator based in Kentville, Nova Scotia. Information provided in this article is meant for general interest only and is not a substitute for legal advice about your own situation. Michael can be reached by email at michael@mvc-private-law.ca  For more information and tips on employment and labour law issues, visit his website at www.michaelcoyle.ca

©Michael V. Coyle, 2012