Employer Slapped with Punitive Damages due to Refusal to Issue Final Wages, ROE

Punitive Damages for Employers Business Man with fingers crossed

In Nelson v. 977372 Ontario Inc. (c.o.b. as Insta Insulations) (“Nelson”), an employer who refused to issue a Record of Employment to a terminated employee and also withheld that employee’s vacation pay and final wages was ordered to pay punitive damages to the employee in addition to damages for wrongful dismissal.

It was discovered at Trial that even though the employer was aware that it was obligated to provide the employee with his unused vacation pay, final wages and a Record of Employment, the employer refused to comply with these obligations. The Court determined that the employer’s refusal to provide the employee with his vacation pay, wages and Record of Employment constituted an “independent actionable wrong”, which is necessary for the awarding of punitive damages. Punitive damages are meant to punish the wrongdoer rather than to compensate the victim. In the case of Whiten v. Pilot Insurance Co., the Supreme Court of Canada stated that punitive damages are only to be awarded in situations where there is “high-handed, malicious, arbitrary or highly reprehensible misconduct that departs to a marked degree from ordinary standards of decent behaviour.” The Court in Nelson determined that the employer’s conduct in knowingly withholding the employee’s final wages, vacation pay and Record of Employment met this stringent test and awarded punitive damages as a result.

Impact of Decision on Employers

Although the awarding of punitive damages is not the norm, employers must ensure that they comply with their statutory and common law obligations to their employees as the refusal to comply with these obligation may result in the awarding of punitive damages. Employers must provide departing employees with unpaid wages up to the date of departure, vacation pay for unused but accrued vacation time, along with a Record of Employment within certain timeframes established by provincial and federal legislation. Items owing to an employee should not be withheld by an employer as a form of leverage as there is potential risk and liability to an employer who engages in such behaviour. A Record of Employment is necessary for employees to apply for employment insurance benefits in certain situations, including where the employee has been terminated without cause or due to a shortage of work. If an employer is uncertain about their obligations to employees both during the employment relationship and at the time of departure, they should consult with Employment Law counsel.

Impact of Decision on Employees

Employees should be aware that they have certain statutory entitlements both during the employment relationship and at the time of departure, with corresponding obligations by their employers. An employer’s failure to comply with their obligations, including the timely provision of vacation pay, unpaid wages and a Record of Employment, can result in undue hardship for an employee and may entitle the employee to compensation, including an award of punitive damages.

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