Ontario Court Awards Over $170,000 to a City of Toronto Employee

The Ontario Superior Court of Justice recently awarded a former employee of the City of Toronto a staggering $170,117.84 in damages for unjust dismissal in Headley v. City of Toronto. This significant judgment accounted not only for payment in lieu of notice but also included “Wallace Damages” against the City for bad faith in the manner of the employee’s termination.

Mark Headley brought a wrongful termination action against the City of Toronto after the City terminated his employment at Seaton House, a shelter for homeless men, on the basis that he had stolen about $5,000 from a number of residents of the shelter, and also that he had grossly neglected his employment duties so as to irreparably sever the employment relationship.

The Facts

Seaton House is Toronto’s largest shelter for homeless men. It services the City of Toronto’s most vulnerable men, many of whom have serious illnesses and/or addictions. Considered a “shelter of last resort”, Seaton House is a rough, dark place, where extreme violence, theft, illicit drug use, and medical emergencies are routine.

In Judge Sanderson’s words, “employment at [Seaton House] brings challenges that most employers and employees will never be required to meet.”

At the material time, Seaton House had over seven hundred beds and provided a number of services, including an emergency hostel offering short-term shelter, a harm reduction program for alcohol and drug-addicted men, and a long-term program (“LTP”), where Headley worked.

The LTP serviced about two hundred and thirty men, who received accommodation, meals, counselling, medical care and other services including music and recreational programmes. Besides room, board and other services, LTP clients sometimes were given spending money.

Despite the difficult conditions at Seaton House, life in the LTP provides stability and safety to vulnerable men living on the City’s streets.

Mark Headley in particular offered a safe place for LTP residents, treating them with respect and dignity.

Headley rose from a difficult start in life to excel in basketball and obtain a degree in recreation management specializing in at-risk communities. He obtained training in suicide prevention, de-escalation and cognitive behaviour. Headley started working at Seaton House in 1998 as a client service worker. He then worked as a counsellor, before being promoted in 2002 to the position of shift leader. In addition to working at Seaton House, Headley volunteered with low income youth and other high-risk communities.

Headley had an exceptional reputation among his colleagues. Described as empathetic, passionate, and trustworthy, he was known for being vigilant to maintain clients’ dignity. Headley dealt with men in their most vulnerable and private moments, always treating them with respect and good humour.

In June 2012, it came to light that Headley had given receipts for maintenance fees (a monthly fee in lieu of rent) to an LTP client named John Hinks for which administration personnel at Seaton House could find no record of corresponding payment/deposit into the shelter’s accounting system.

After completing an internal investigation, the City of Toronto terminated Headley’s employment.

Headley vehemently denied that he ever stole any clients’ money, or that he otherwise breached his duties to Seaton House clients or to the City.

The Case

In Headley’s wrongful dismissal action against the City of Toronto, the court was charged with determining three issues:

(i) Whether the City of Toronto proved that it had just cause to terminate Headley’s employment;

(ii) If the City has not proved just cause, the appropriate notice period and the quantum of damages to be awarded in lieu of notice; and

(iii) Whether the City should be ordered to pay Wallace damages, punitive or aggravated damages in addition, and if so, in what amount.

The parties agreed that if no just cause was proven, the quantum of Headley’s monthly loss was $5,839.88. They further agreed that in order to arrive at a figure for wrongful dismissal damages, the court should simply multiply that monthly loss by the number of months of reasonable notice.

The Decision

After an eleven-day trial, Judge Sanderson concluded that there was “an insufficient basis for dismissal for cause”. She found no dishonesty or misconduct sufficient to warrant a finding of irreparable breakdown of trust or of conditions necessary to sustain the employment relationship.

Much of Sanderson J.’s decision turned on witness credibility.

While the many witnesses agreed on some of the factual matters before the court, there were significant discrepancies in their evidence on important points, including how easy or difficult it would have been for someone other than Headley to have accessed the money in question.

Judge Sanderson disagreed with counsel for the City’s submission that Headley was not a credible witness. Although she characterized his evidence as, at times, “emotional”, Sanderson J. found it generally to be credible.

Ultimately, on most of the crucial contested facts, Sanderson J. found that Headley’s evidence was corroborated by other evidence that she accepted.

She accepted the evidence about Hinks’ physical aggression, deteriorating memory, and frustration about missing money, and the fact that he regularly had money stolen from him. She accepted the evidence on the almost open access to the shift leaders’ office from which the monies allegedly disappeared, and lack of uniform practices in the safekeeping procedures for client monies. She accepted Headley’s claim that he had twice issued receipts to Hinks when no money had been received, in order to calm his fears that he would be evicted for failing to pay maintenance fees.

Judge Sanderson concluded that the City’s evidence, taken as a whole, did not provide sufficient basis of which she could find that Headley stole the money in question. She held that the investigation was inadequate and based on false assumptions, and that the City failed to find sufficient relevant evidence to prove theft, fraud, or dishonesty on Headley’s part.

Meanwhile, she found that “Headley loved his job and by all accounts did it well, with empathy and humanity. He took serving, preserving the dignity of and keeping Seaton House clients safe very seriously.”

While she acknowledged that Headley erred in issuing the two receipts in question, Judge Sanderson held that his dismissal was disproportionate to the gravity of his misconduct.

In a stinging conclusion, Sanderson J. held that “given the gaping deficiencies in the City’s evidence, the City has not met its onus of proving fraud or dishonesty on Headley’s part, even on a simple balance of probabilities.” Therefore, it did not have just cause to terminate his employment.

Considering the factors set out in Bardal v. Globe and Mail Ltd., including Headley’s age at termination, the length of his employment, his position and responsibility, and the availability of similar employment, Sanderson J. held that the appropriate period of reasonable notice is eighteen months. Multiplying the $5,839.88 per month figure agreed upon by the parties by eighteen months, she concluded that Headley was entitled to damages in lieu of notice in the amount of $105,117.84.

Wallace Damages

“Wallace Damages”, named for the case of Wallace v. United Grain Growers Ltd., are ordered where an employee has proven that the employer engaged in bad faith conduct or unfair dealing during the course of the dismissal and that the employee suffered damages as a result. As the Supreme Court held in that case,

[…] in the course of dismissal employers ought to be candid, reasonable, honest and forthright with their employees and should refrain from engaging in conduct that is unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive.

Bad faith or unfair conduct may be properly compensated for by an addition to the notice period.

Considering twenty-nine facts which Headley’s counsel identified as demonstrating bad faith, Judge Sanderson agreed that the City failed to meet its obligation of good faith and fair dealing in the manner of Headley’s dismissal.

Sanderson J. held that while it was reasonable to investigate Headley for the alleged theft, the City did not meet its obligation of good faith and fair dealing in the manner of his dismissal: ultimately, “the dismissal was based on unproven suspicions after an incomplete investigation, insensitively and unfairly conducted.” She further held that the City’s conduct of the dismissal itself was “unfair, unreasonable, excessively harsh and unduly insensitive”, the termination letter alleging unsubstantiated fraud and dishonesty.

In Judge Sanderson’s view, it was foreseeable that the City’s manner of dismissal would cause Headley not only mental distress but also ongoing difficulties in finding comparable alternative employment.

Noting that Headley was unsuccessful in finding a comparable position in the seven years since his termination, despite reasonable efforts, Sanderson J. held that the “inevitable cloud” created by the unfair dismissal “foreseeably led to tangible financial loss of income”. Given Headley’s positive employment history prior to his termination from Seaton House, she opined that “[b]ut for the unfairness in the manner of his termination, including the unfounded allegations of theft, fraud and dishonesty,” Headley would have had little difficulty obtaining a comparable position and earning comparable income to that which he earned prior to his dismissal. The financial consequences suffered by Headley and his family due to the manner of his termination have been significant.

Judge Sanderson added that she hoped that her judgment would dispel that “cloud” and allow Headley to now find a suitable position.

She accordingly awarded $65,000 in Wallace damages, representing $15,000 for the mental distress caused to Headley due to the manner of dismissal, and $50,000 for the tangible financial loss caused by the manner of the dismissal as the false accusations of theft impaired his ability to find comparable employment.

Combined with the damages awarded him in lieu of notice, Headley was awarded a total of $170,117.884 as a result of his unjust dismissal.

Key Takeaways

This case demonstrates how risky it can be to allege just cause for termination of a long-term employee. The City made several errors in this case, which employers should take care to avoid. Employers are cautioned against alleging just cause unless there is direct and clear evidence of serious misconduct. They are also encouraged to conduct a proper investigation with a competent investigator.

Minken Employment Lawyers is your source for expert advice and advocacy on today’s employment law issues. Whether you are an employer or an employee, we can help. Contact us to see how.

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