2008 Ends on a Low Note for Employers

July 30, 2009

2008 was a banner year for jurisprudence favoring employers. However, a little known judgment of the Ontario Superior Court of Justice released just two days before Christmas confirms the need for vigilance and the risk posed by claims based on privileges other than the general law of contract.

The case is Piresferreira v. Ayotte and the Plaintiff, Ms. Piresferreira was an account manager in Bell Mobility’s Enterprise Sales Division. She sold cellular, pager and data transmission products to large institutions. As a result of verbal abuse and shoving committed by her manager, Bell Mobility became vicariously liable for a damage award in excess of $500,000. Bell was also unable to claim a deduction for Long-term disability benefits paid by Manulife to the Plaintiff.

Facts

Ms. Piresferreira who was nearly 61 years old at the time of the incident worked under Mr. Ayotte at Bell Mobility’s Ottawa office. She came to Canada in 1965 and after 21 years at the Brazilian Embassy started a career selling wireless products for Rogers and then for 9 years with Bell.

Ms. Piresferreira’s business was made up exclusively of agencies of the Federal Government. The Government’s purchasing activity contracted in 2004 leading to poor results for Ms. Piresferreira.

Ms. Piresferreira’s manager, Mr. Ayotte, was demanding and had a habit of yelling at and using profanity with his employee’s and especially with Ms. Piresferreira. This escalated after the poor results in 2004.

In early 2005 Ms. Piresferreira’s sales were improving but on May 12, 2005 when she had not arranged for some government clients to meet with a manufacturer representative on certain dates Mr. Ayotte flew into a rage and berated her in front of a representative from head office. Later that day when they met each other in the hall Mr. Ayotte again started yelling at Ms. Piresferreira about the same incident and when Ms. Piresferreira tried to show Mr. Ayotte an e-mail on her BlackBerry proving she had tried to contact the clients Mr. Ayotte shoved his nearly 61-year-old female employee causing her to move a step backwards.

She followed him to his office to demand an apology but none was forthcoming and instead Mr. Ayotte immediately threatened to put her under the Performance Improvement Plan (PIP) - essentially putting her on probation.

Ms. Piresferreira left the office that afternoon in effect never to return. She filed a complaint which the company was later held not to have taken seriously and she began suffering from Post-Traumatic Stress Disorder or a major depressive episode. She was still on long-term disability at the time of trial.

Vicarious Liability

Mr. Ayotte was found by Justice Aitken to have committed assault as well as intentional and negligent infliction of mental distress. These torts led to general damages of $50,000. This was then adjusted to $45,000 on a 10% negative contingency.

Bell was held vicariously liable for the actions of Mr. Ayotte. This was because employers are held liable for unauthorized acts if they are so connected with authorized acts as to be seen as modes (even if improper modes) of performing the authorized act.

In this case Mr. Ayotte was employed by Bell to manage, supervise and discipline Ms. Piresferreira and the assault flowed from these authorized activities in that Mr. Ayotte was managing the Plaintiff in her assigned task of setting up the client meeting.

The Judge also pointed to a broader basis of liability – namely that Mr. Ayotte’s superior, Mr. Shiu, let Mr. Ayotte run the office and set the tone without talking directly to any of Ayotte’s subordinates even with the knowledge of Ayotte’s aggressive manner and the difficulties in 2004 and 2005 that would likely have led Ayotte to be even more aggressive with his staff. By giving Mr. Ayotte so much control over the Ottawa office Bell could not escape liability for his actions.

Damages

Ms. Piresferreira was awarded all lost income including sales bonuses until age 65 - $500,955 less a ten percent contingency adjustment.

Constructive Dismissal

The Court also held that Ms. Piresferreira was constructively dismissed on May 24, 2005 due to Bell’s failure to live up to “the implied term of any employment relationship that the employer will treat the employee with civility, decency, respect and dignity.” Bell had not taken reasonable steps to hold its employees to its policies relating to harassment and violence or to ensure Ms. Piresferreira would not be subjected to further abuse and intimidation or to ensure her work environment would not continue to be so hostile as to further harm her psychological health.

The appropriate period of reasonable notice was found to be 12 months but no additional money was awarded as she had already been granted tort damages of her lost income through that period and beyond.

Long-Term Disability Benefits

Bell argued that disability benefits received by Ms. Piresferreira during the 12 month notice period should be deducted from damages awarded. This is often done to avoid double compensation of the plaintiff especially if the plaintiff did not pay for the insurance directly by paying premiums or indirectly for example by giving up some salary for the benefits in negotiations.

In this case Bell did pay the premiums for the insurance. However these were “flex” benefits. Ms. Piresferreira had a “Flex credit” to apply towards the benefits she wished to have including LTD. The amount of “Flex credit” she spent was deducted from her “Flex salary” which in turn affected her “Adjusted Annual Salary Rate.” There was no evidence on how this might have affected the actual salary paid to her, but the fact it notionally affected her salary was enough for the trial Judge. The Judge also cited the fact that Ms. Piresferreira was told that her benefits were part of her compensation at Bell. This part of the decision cost the employer over $18,000.

Lessons

Employers should be aware that they can be held vicariously liable for the actions of their employees even when they act outrageously when those actions are connected to authorized acts. Employers should not turn a blind-eye to bad behaviour on the part of managers.

Justice Aitken noted that the entire handling of the affair was approached as an exercise in damage control on behalf of the employer and the offending manager with little regard for the victim. This sentiment was present throughout the Judge’s reasons and no doubt had an influence on the outcome.

The case is also a concrete example of wrongdoing in the workplace leading to damages for loss of income over a much longer period – over 4 years – than what could be awarded in any wrongful dismissal case. It demonstrates the benefits to Plaintiffs and the risks to employers if a tort claim for mistreatment in the workplace is pursued.

This case also shows the importance of being able to prove the precise nature of insurance benefits provided to employees. If Bell had called more evidence on this matter it might have been able to save itself $18,000 worth of double recovery.

Piresferreira v Ayotte and Bell Mobility Article