It is often assumed that employees need medical documents to establish that they are suffering from something if they seek to claim a right from their employer. This assumption is starting to change. Earlier this year, the Ontario government announced its plans to get rid of sick notes, often a requirement to get sick days, as an effort to cut down on paperwork for family physicians.

However, it is still often assumed that you need to provide medical evidence if you plan to claim that an injury limited your ability to mitigate or to receive bad faith in the manner of dismissal damages. I previously wrote a blog about bad faith in the manner of dismissal, where I noted that it requires mental distress beyond what is normally expected after a termination. This assumption may change thanks to Ontario's Court of Appeal's decision in Krmpotic v Thunder Bay Electronics Limited (2024 ONCA 332).

Krmpotic v Thunder Bay Electronics Limited (2024 ONCA 332)

Drago Krmpotic worked for Thunder Bay Electronics Limited and Hill Street Financial Services (collectively the employer) for just under 30 years with no employment contract. A couple hours after Mr. Krmpotic had returned from medical leave, to recover from back surgery, he was called into a meeting where his employer terminated his employment. The employer claimed at the termination meeting that the reason for the termination was "financial reasons" and offered him a 16-month severance package. Mr. Krmpotic refused and started an action for wrongful dismissal and bad faith in the manner of dismissal. Despite this, the employer continued paying his regular salary for 16 months and maintained his employee group benefit package for several years.

The trial judge found that Mr. Krmpotic was wrongfully dismissed and was entitled to 24 months of pay in lieu of notice, making the employer liable for the 8 additional months of pay that it did not provide him. The trial judge found that the notice period should not be reduced because Mr. Krmpotic was 59 years old and was significantly limited in his ability to perform the physical labour that his occupation demanded. The trial judge also awarded Mr. Krmpotic $50,000 for aggravated/moral damages for the bad faith in the manner that the employer dismissed him, despite the lack of medical evidence showing that the termination caused mental distress.

The Ontario Court of Appeal unanimously upheld the trial judge's decision. The Court found that whether an employee took reasonable steps to mitigate is largely a question of fact. The reasons that the trial judge gave for why Mr. Krmpotic was not able to mitigate were valid reasons of fact, therefore there is no reason for appellate interference. The Court rejected the argument that the physical incapacity to mitigate can only be established by expert medical evidence, as the medical history was sufficient to show that Mr. Krmpotic's injuries restricted his ability to mitigate his damages through comparable employment. The Court also rejected the argument that the trial judge erred in finding that Mr. Krmpotic was entitled to damages for bad faith in the manner of dismissal because Mr. Krmpotic failed to give medical evidence showing that he suffered from mental distress. The Court explained that though the normal distress and hurt feelings caused by a termination are not compensable, it would be too high of a standard to require a medical diagnosis of mental distress. Bad faith in the manner of dismissal damages can be awarded for mental distress caused by the dismissal even if it does not reach the level of a diagnosable psychological injury. The employer's failure to be forthright by improperly claiming that the termination was for financial reasons satisfied the requirement that the employer was unduly insensitive to get bad faith in the manner of dismissal damages.

Takeaways from Krmpotic v Thunder Bay Electronics Limited (2024 ONCA 332)

This case serves as a warning for Ontario employers. Ontario employers should be very careful in the manner that they dismiss employees. The termination must be implemented in a manner that is candid, forthright, and not unduly insensitive to an employee's circumstances. The Court of Appeal's decision allows for cases where the employer is not adequately sensitive to the termination of the employee, causing mental distress that is not medically diagnosed to result in significant damages against the employer.

Though not a main aspect of this case, the damages should serve as a reminder for employers to have all of their employees under contract. If Thunder Bay Electronics Limited and Hill Street Financial Services had Mr. Krmpotic under a valid contract, they may have been able to limit the amount of notice that Mr. Krmpotic was entitled to.

How Suzanne Desrosier Professional Corporation can help

If you are an employer, you should call our office before terminating an employee. Our employment lawyers can advise you on whether you have the grounds to terminate the employee and can walk you through the proper way to administer a termination. We can also help ensure that you have employment contracts that mitigate the amount of notice that an employee is entitled to upon termination. To speak to one of our employment lawyers, please call us at 705-268-6492 or email us atinfo@sdlawtimmins.com.