When Dismissal Becomes Abusive: The Superior Court’s Decision in Insogna

In Insogna c. American Orthodontics Corporation, the Superior Court considered the termination of a territory manager whose employment was abruptly ended after 20 years with the company. The Court awarded compensation in lieu of reasonable notice as well as moral damages arising from the employer’s abusive conduct following the dismissal. It declined, however, to award compensation for extrajudicial fees, finding that the threshold for abuse of process had not been met.

The employee had worked as Territory Manager for Québec and Atlantic Canada for two decades before his employment was terminated effective immediately upon receipt of a termination letter, claiming he had failed to meet the requirements of his position. The employer offered 50 weeks of severance based solely on the employee’s base salary, excluding commissions which regularly represented between 20% and 50% of his total earnings.

The case raised three main legal questions: first, whether compensation in lieu of reasonable notice was owed to the employee and in what amount; second, whether the employer’s conduct in connection with the dismissal justified an award of moral damages; and third, whether the employer’s litigation conduct warranted reimbursement of part of the employee’s legal fees.

With respect to compensation in lieu of reasonable notice, the Court recalled that under article 2091 C.c.Q, an employer may terminate a contract of employment of indeterminate duration by providing reasonable notice, unless serious grounds justify termination without notice under article 2094 C.c.Q. When determining the appropriate notice period, the Court considered the nature of the employment, the circumstances in which it was carried on, and the employee’s years of service. As a result, the parties agreed that a 12-month notice period was reasonable, particularly in light of the employee’s age and nearly 20 years of service. The Court further confirmed that compensation in lieu of notice had to reflect the remuneration the employee would normally have received during that period, including both base salary and commissions. After deducting the employee’s earnings from alternate employment during the notice period, the Court awarded $90,162 in compensation in lieu of reasonable notice.

In its analysis of whether moral damages were appropriate in the given circumstances, the Court emphasized that the applicable test is a stringent one for two reasons. Firstly, due to the risk of overcompensating an employee where compensation in lieu of reasonable notice should already suffice to address the ordinary consequences of termination. Secondly, to avoid imposing additional economic burdens on an employer for merely exercising its discretionary right to terminate. As a result, an award of moral damages requires proof of two elements: a distinct wrong, consisting of bad faith or a blatant fault separate from the termination itself and, a distinct injury resulting from said wrongdoing which exceeds the inherent emotional distress caused by said dismissal.

The Court found that although the termination meeting itself had been cordial, the employer’s conduct following the dismissal justified an award of moral damages. More specifically, in a letter sent after the termination, the employer made allegations concerning the employee’s lack of professionalism, competence, and preparation, as well as his difficulty maintaining client relationships. After reviewing the evidence, the Court concluded that these assertions were either unsupported or significantly exaggerated and that there was no reasonable basis for making them. In doing so, the employer acted in a “high-handed manner” toward a long-serving employee whose record was otherwise positive. The Court therefore held that this conduct constituted a distinct fault. It further found that the letter caused the employee emotional distress that was separate from, and went beyond, the ordinary consequences of termination. However, said injury was situated near the lower end of the spectrum of moral damages, notably because the statements were not publicized and because the employee was able to secure new employment. As a result, the Court awarded $7,000 in moral damages.

Finally, with respect to extrajudicial fees, the employee argued that the employer’s initial defense, which alleged serious grounds for termination and denied any entitlement to reasonable notice, amounted to an abuse of process under article 51 C.C.P. The Court rejected this argument. Although it acknowledged that several of the employer’s allegations were weak and later abandoned, it reiterated that the threshold for abuse of process remains high. It also noted that those allegations had been advanced in response to proceedings in which the plaintiff’s own claims were, at the time, overstated. The Court emphasized that weak or exaggerated allegations do not, in themselves, amount to abusive proceedings. Furthermore, the Court noted that no specific evidence had been provided to establish the legal fees allegedly incurred as a result of that conduct. Accordingly, no award for extrajudicial fees was granted.

The following paragraphs are particularly relevant to the Court’s analysis of the dismissal:

[18] The purpose of the notice period is essentially to allow the employer to bring an end to the employment relationship and find another suitable person to exercise the departing employee’s functions, while affording the latter an adequate opportunity to find alternate employment without suffering economic loss.

(…)

[20] Compensation in lieu of reasonable notice consists generally of the remuneration that the employee would have earned during the reasonable notice period, less any earnings from alternate employment during that same period.

(…)

[32] Terminating an employee and bringing an end to an indefinite term contract of employment is not a fault.13 Rather, it is the exercise of a discretionary right that inevitably causes harm, including emotional distress, to the employee. The right to a reasonable notice period is aimed, among other things, at compensating the inevitable emotional consequences of an unexpected termination.

[33] There are instances, however, where the right to terminate is exercised in an abusive fashion that may constitute a fault that is separate and distinct from the termination itself. To the extent that the abusive exercise of the right to terminate causes the employee a distinct injury, over and above the inevitable harm flowing from the termination itself, an additional award of moral damages may be available.15 As explained by Baudouin J.A. in Standard Broadcasting, “Congédier n’est pas une faute, congédier de façon humiliante, dégradante, blessante ou mortifiante, peut l’être! ”

(…)

[35] Accordingly, the test for finding abuse of right in termination is a stringent one.There must be a distinct wrong – consisting of bad faith or an otherwise blatant fault – that causes a distinct injury beyond the ordinary consequences of termination.To find an abuse of right in terminating thus requires clear evidence that the terminated employee suffered serious reputational harm or clear evidence of a termination conducted in a manner that is humiliating, degrading or hurtful to the employee.

(…)

[101] The principles of proportionality, collaboration, and good faith in legal proceedings encourage parties to focus on the real issues and adopt reasonable positions. Courts should be wary of too easily characterising weak positions advanced in pleadings and abandoned in relatively short order as abusive. Were it otherwise, litigants might be encouraged to intransigently persist with unreasonable positions, lest resiling from any argument be perceived as supporting a finding of abuse. That perverse outcome would hardly further the administration of justice.