Appeal Court reaffirms high bar for awarding mental distress damages

In Cottrill v. Utopia Day Spas and Salons Ltd., a recent decision of the British Columbia Court of Appeal, the court set aside an award of $15,000 in aggravated damages to a wrongfully dismissed employee on the basis that “there was no evidence that the manner of dismissal caused the respondent mental distress beyond that caused by the dismissal itself.”

At trial, the plaintiff, Jennifer Cottrill, sought damages for wrongful dismissal against her employer, Utopia Day Spas and Salons Ltd. Cottrill had worked for Utopia for a decade when, in January 2015, the company became concerned with her job performance. Two members of senior management then met with Cottrill and gave her a letter stating that she had three months to improve her performance or she would be terminated from employment. Three months later, Cottrill was in fact terminated for the alleged performance deficiencies.

The British Columbia Supreme Court agreed with Cottrill that Utopia did not have cause to terminate her, and that dismissal was not a just and proportionate response to her alleged performance issues. The trial judge found that Utopia had unreasonably sought to hold Cottrill to performance standards which it had not previously required her to meet, failed to provide her with a fair and reasonable assessment of her performance, and gave no meaningful attention to the improvement they said they were looking for. The trial judge ultimately awarded Cottrill the eight weeks’ severance pay she was entitled to pursuant to the termination provisions of her employment contract, as well as $15,000 in aggravated damages for bad faith in the manner of dismissal. The trial judge reasoned that “the events clearly had a profound effect on the plaintiff” because amongst other things, she cried, “went numb,” and had to leave work early on one occasion because she was so upset.

Utopia subsequently appealed, arguing that the trial judge erred in awarding mental distress damages “in the absence of any evidence of actual harm.” Utopia contended that the degree of mental suffering caused by the dismissal was not sufficient to warrant compensation. The British Columbia Court of Appeal agreed with the company and overturned the lower court’s $15,000 mental distress award. Justice Goepel of the Court of Appeal observed that there was no evidence from Cottrill, family members, friends, physicians, or other experts regarding Cottrill’s mental state following her termination. Although such evidence is not strictly required for mental distress damages to be awarded, Justice Goepel found that the absence of any evidentiary foundation showing “serious and prolonged disruption that transcends ordinary emotional upset or distress” was fatal to Cottrill’s claim for aggravated damages in this case.

Cottrill reaffirms that unfairness and hurt feelings alone should seldom warrant an award for aggravated or “mental distress” damages resulting from the termination of employment. While employers can continue to take comfort in the fact that normal distress resulting from dismissal should not be compensable, it is important to be mindful of the significant liability that can arise from high-handed, bad faith, and unduly insensitive conduct in the manner of dismissal. If a terminated employee is able to prove mental distress, which was not the case in Cottrill, a trial judge could order the employer to pay substantial damages.

For more information see:

• Cottrill v. Utopia Day Spas and Salons Ltd., 2018 CarswellBC 2729 (B.C. C.A.).

• Cottrill v. Utopia Day Spas and Salons Ltd., 2017 CarswellBC 1144 (B.C. S.C.).

Alex Ognibene is an associate in McCarthy Tétrault's Labour & Employment Group in Toronto. He can be reached at (416) 601-8098 or [email protected].