Former Walmart executive awarded $750,000 in extraordinary damages

Retail giant’s bad faith in removing executive and keeping her in limbo before terminating her warrants large award on top of salary and bonus damages
By Rich Appiah
|Canadian Employment Law Today|Last Updated: 02/20/2018

In a recent decision that opens the range of extraordinary damages available to dismissed employees, an Ontario executive was awarded $750,000 in moral and punitive damages arising from her employer’s decision to unnecessarily prolong her dismissal, and form her employer’s post-termination conduct — one of the largest such damage awards ever given in Canadian employment law. Employment lawyer Rich Appiah discusses how this decision continues a trend for courts to compensate for the power imbalance between employers and emlpoyees when an employee is treated poorly both before and in the course of termination.

The Ontario Superior Court of Justice has awarded a former Walmart executive $750,000 in moral and punitive damages plus more than $400,000 in wrongful dismissal damages despite narrow contractual severance terms to which she agreed after the retailer marginalized and then fired her.

Gail Galea started working for Walmart Canada in September 2002 as a management trainee. In 2005, she was appointed General Merchandise Manager (GMM), reporting to a senior vice-president. In 2008, she was promoted to Vice-President, General Merchandising. She was repeatedly selected for exclusive executive development programs and expected eventually to be appointed Chief Merchandising Officer. Walmart leadership suggested that she might one day run a country division.

Matters changed dramatically in January 2010 when, due to a “cultural shift,” the president of Walmart Canada, David Cheesewright, relieved Galea of her executive role. At a meeting of hundreds of associates — including Galea’s former direct and indirect reports — he made an announcement confirming that she had been removed from the senior executive team and assigned a supporting role.

Although Cheesewright told Galea that he wanted her to remain with the company, he also indicated that he did not know what to do with her. In the ensuing months, with the company’s ostensible support, Galea actively sought a meaningful position. She travelled frequently, explored roles in overseas divisions, and even began Spanish lessons. However, during a meeting with a Walmart executive, she learned that in a recent performance review Cheesewright ranked her as “not currently promotable” without her knowledge. This was a downgrade from a prior rating. A second related metric of her performance had also been downgraded.

In November 2010, upon her return from an eight-week executive training program, Galea discovered that her belongings had been relocated from her office and her telephone had been disconnected. From her new office, she no longer had access to Cheesewright. Shortly thereafter, Cheesewright gave her the choice of running an e-commerce division on a probationary basis or accepting a severance package. Galea later heard that in the new position, she would report to an executive who did not want her in the organization, and her low performance rating would hinder her advancement.

Though these events seemed to demonstrate that Walmart did not have confidence in her, Cheesewright and others frequently expressed their support. Galea attempted to discuss the matter further with him and the company’s human resources manager. However, on Nov. 19, 2010, Walmart terminated her employment.

Galea’s extensive efforts to find other work at Walmart proved unfruitful. She never received a job description for the e-commerce role, and Walmart provided her with no viable options to remain employed. She concluded that Walmart prolonged her dismissal for nine months to her personal detriment. She commenced an action claiming damages for wrongful dismissal, and moral and punitive damages.

Non-competition agreement

Galea’s wrongful dismissal damages turned on a two-year non-competition agreement (NCA) that she signed when she was promoted to GMM in 2005. In exchange for her acceptance of the NCA, Galea was promised, for a two-year “transition period,” “transition payments” including her base salary, any incentive payable “in accordance with the annual incentive plan (AIP) in effect on the date of termination,” and Walmart’s portion of health and dental premiums.

When Galea signed the NCA, she was participating in one AIP. Walmart management also recommended that she receive stock options under a stock incentive plan. By January 2010, she was participating in four different incentive programs — a discretionary Management Incentive Program (MIP), paid as a percentage of her base salary; a Deferred Profit Sharing Program (DPSP), entitling Galea to four per cent of her annual salary, bonus and vacation pay; an Executive Retirement Plan (ERP), into which Wal-Mart made contributions on her behalf annually; and a Long-Term Incentive Plan/Performance Share Plan (PSP), under which Galea received a one-time award of shares vesting equally in January 2009, 2010 and 2011. One issue at trial concerned Galea’s entitlement to compensation associated with such programs during her transition period. At the time she signed the NCA, they did not exist. Walmart additionally argued that program terms disqualified her entitlement post-termination.

Citing the Ontario Court of Appeal’s decision in Paquette v. TeraGo Networks Inc., the court held that “damages in a wrongful dismissal case ‘should place the employee in the same financial position he or she would have been in had reasonable notice of that employee’s (dismissal) had been given.’” The court found this principle applied to an agreement, such as the NCA, providing for compensation over a prescribed term. Relying upon the appellate court’s decision in Wood v. Fred Deeley Imports Ltd., the court also preferred an interpretation of the NCA favouring Galea where it could reasonably be interpreted in more than one way.

In the court’s view, the term “any incentive,” in the NCA, suggested that more than one incentive might be made available to her upon her dismissal. The court thus read the word “Plans” into the term “Annual Incentive Plan.” On this basis, the court awarded damages of $437,434 for payments owing to Galea during the transition period under the MIP (although MIP terms excluded payments post-termination), DPSP and ESP, among other damages. Despite the award of MIP payments, Galea was not awarded payment in lieu of stock vesting under the PSP because plan terms prohibited vesting subsequent to Galea’s dismissal.

Significantly, the court also awarded Galea $250,000 in moral damages and $500,000 in punitive damages due to Walmart’s conduct after January 2010. In awarding moral damages, the court cited the Supreme Court of Canada’s decisions in Wallace v. United Grain Growers Inc. and Keays v. Honda Canada Inc., and confirmed an employer’s duty of good faith and fair dealing in the course of dismissing an employee. The court held that damages for a breach would be available to Galea if they were reasonably foreseeable, and Galea had no obligation to tender medical evidence to support her claim for them.

The court found that in January 2010 Cheesewright decided to “dismiss or denigrate (Galea) to the point where she might resign…. She was, as she (put it), left to ‘twist in the wind’.” Galea testified that after January 2010, she felt like she was floundering; the February 2010 announcement caused her embarrassment; and the respect she had earned in the preceding eight years had been taken away. The circumstances affected her physically and mentally while, to Walmart’s knowledge, her husband was in poor health, and she was her family’s sole income earner. Eleven months post-termination, Walmart discontinued Galea’s salary and, without her knowledge, her health and dental coverage, despite the clear terms of the NCA. Walmart also delayed answering undertakings until the eve of trial, and made a “torrent of productions” in the course of trial. The court found that such behaviour prolonged Galea’s anguish over her case.

In awarding punitive damages, the court cited the Supreme Court of Canada’s decision in Whiten v. Pilot Insurance Company, holding that such damages may be “awarded in exceptional cases against a defendant for ‘malicious, oppressive and highhanded’ misconduct that ‘offends the court’s sense of decency.’” The court referred to the power imbalance between the parties; Cheesewright’s arbitrary alteration of her performance rating; Walmart’s ultimatum that she choose between a probationary position or a severance package; and its apparent indifference to the litigation process. “Although the same facts form the basis of awarding punitive damages as those for awarding (compensatory) damages,” the court held, the real concern was to avoid over-compensating Galea. The court found that Walmart’s misconduct occurred at such a high level and with such high visibility that punitive damages “sufficient to serve the objectives of denunciation… and deterrence” were necessary.

Employer takeaways

Galea’s case warns employers of the significant financial risks they assume when enacting job changes designed to force an employee’s departure. Walmart paid a significant price for such conduct, as well as for post-termination tactics viewed by the court as hardball or indifferent to her situation. The case also demonstrates that common law objectives to compensate wrongfully dismissed employees will continue to inform the manner in which courts interpret contractual severance terms.

For more information see:

Galea v. Wal-Mart Canada Corp., 2017 CarswellOnt 19522 (Ont. S.C.J.).

Paquette v. TeraGo Networks Inc., 2016 CarswellOnt 12633 (Ont. C.A.).

Wood v. Fred Deeley Imports Ltd., 2017 CarswellOnt 2408 (Ont. C.A.).

Wallace v. United Grain Growers Inc., 1997 CarswellMan 456 (S.C.C.).

Keays v. Honda Canada Inc., 2007 CarswellOnt 1874 (S.C.C.).

Whiten v. Pilot Insurance Company, 2002 CarswellOnt 537 (S.C.C.).

Rich Appiah is principal of Appiah Law, an employment and labour law firm in Toronto. He can be reached at rich@appiahlaw.com or (416) 900-3715.

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