Howard Levitt: Company's false suggestion ex-employee may have been involved in murder backfires

Howard Levitt and Jeff Buchan: Company ordered to pay hefty severance and damages following president’s allegations

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By Howard Levitt and Jeff Buchan

Employers too often make the mistake of firing an employee for cause without having the grounds to do so, sometimes going so far as to fabricate a justification for the dismissal. Courts in Canada do not hesitate to level substantial aggravated and/or punitive damages against such employers.

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It is less common, however, to see those types of damages awarded to employees fired without cause. But where, among other things, the court finds false allegations of possible involvement in a murder are made by a company official against a dismissed employee, it is hardly surprising the court would such damages.

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This was the case laid out in a recent claim brought by a 69-year-old engineer, Martin Koshman, against Controlex Corp., a real estate development and property management company in Ontario.

Koshman had been employed with the company as its vice-president for 18.5 years and had a salary of approximately $228,000.

When the president of the company died, the president’s wife, Susan Dent, took over as the new president. According to an Ontario Superior Court ruling, which relied on the statement of claim and evidence provided by Koshman after the company failed to defend itself, the eight weeks that followed saw Mrs. Dent embark on a campaign of defamation to destroy Koshman’s reputation and undermine his ability to do his job.

In addition to alleging the employee was a “nobody” and that he was “on the take” in visits to numerous customers of the company, who later described the encounters to Koshman, Mrs. Dent also “suggested it was possible her husband had been murdered and Mr. Koshman may have been involved.”

During this time, Koshman was also cut off from his management duties and eventually received notice of his termination via courier. He was offered only eight weeks’ pay in lieu of notice of his termination. The company also failed to pay out the employee’s accrued vacation entitlements under the Employment Standards Act in the amount of $151,506.89.

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In a decision released in December, the Ontario Superior Court awarded notice of 24 months and pay in lieu of benefit continuation for the entirety of the 24-month period estimated at 10 per cent of base salary, for an overall total of $471,461.68.

An additional $100,000 was awarded in aggravated and punitive damages to Koshman to compensate him for the manner of his dismissal, as well as another $192,112.19 in costs. While false allegations of murder are uncommon in the workplace (thankfully), the company in this case also made mistakes in dismissing its employee that many employers are guilty of, including:

• Unilaterally removing duties from under the employee’s purview prior to dismissal;
• Failing to pay out accrued vacation pay upon dismissal;
• Callously terminating the employee via an impersonal letter from a courier, and without warning;
• Making baseless allegations for cause following dismissal;
• Making baseless counterclaims in the face of an employee’s claim, including breach of fiduciary duty; and,
• Failing to adequately communicate with Plaintiff’s counsel and the court during litigation.

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In short, this case serves as a cautionary tale for employers. Any one of these errors can and has been cited by Canadian courts in awarding aggravated/punitive damages.

Accusations of murder made against a dismissed employee may be rare and extreme, but an employer disparaging a dismissed employee prior to and immediately following dismissal is not. Aside from leading to additional damages at trial, in certain circumstances it has the potential to violate terms of settlement that are common in most settlement agreements.

Indeed, many employers agree to provide a positive letter of reference and assurances that verbal representations will match as part of an agreement to settle an employee’s claim. It is also common to have a mutual “non-disparagement” clause in settlement documentation that essentially states that neither party can speak negatively about the other.

If a rogue employee then goes around defaming the dismissed employee after such an agreement is reached, the employee may be entitled to rescind the settlement and sue the employer.

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It is true that emotions often run quite high at the time of dismissal, both on the employee and the employer side, but both must ask themselves — “is what I am about to say worth the liability that could follow?”

When it comes to false murder accusations, we assume our readers know the answer.

Howard Levitt is senior partner of Levitt Sheikh, employment and labour lawyers with offices in Toronto and Hamilton. He practices employment law in eight provinces. He is the author of six books including the Law of Dismissal in Canada. Jeff Buchan is a lawyer with Levitt Sheikh.

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