Legal News

Release Me! – Employer’s Demand for Release in Exchange for Statutory Minimums Results in Award of Punitive Damages

A recent decision of the Supreme Court of British Columbia, Thompson v. Revolution Resource Recovery, 2025 BCSC 8, highlights how an employer’s bad faith conduct in the manner of termination and a restrictive covenant agreement increased the employer’s liability in a wrongful dismissal case.

The Facts
The employee, Ms. Thompson, was employed as an accounts manager. Shortly after commencing employment, Ms. Thompson signed a restrictive covenant agreement that contained a non-solicitation clause, a non-compete clause and a confidentiality clause.
Ms. Thompson was terminated without cause after three years and four months of service. At the time of her termination, the employer provided a cheque to satisfy their requirements under the BC Employment Standards Act, but offered it subject to the condition that cashing the cheque would release the company from any further liabilities.

Ms. Thompson asserted that she was owed additional notice and was not prepared to release the company. She provided the company with a chart summarizing her compensation, highlighting the requirement to pay her statutory minimum entitlements within 48 hours. Ms. Thompson followed up a couple of days later requesting how the company calculated her termination pay. The company did not respond. Several days later, the company issued Ms. Thompson a cease and desist letter threatening legal action, alleging that she breached the restrictive covenant agreement and misused confidential information in drafting the compensation summary chart.

Impact of Restrictive Covenants on Reasonable Notice
In assessing reasonable notice, the court considered the effect of the restrictive covenant agreement. The court highlighted that non-compete and non-solicitation agreements can potentially have a deleterious effect on an employee’s ability to find alternative work. The court found Ms. Thompson’s non-compete was extremely broad in both territory and application and determined that Ms. Thompson’s ability to look for alternative work was significantly impacted. The court assessed reasonable notice at six (6) months. However, the court also went on to deduct one (1) month based on Ms. Thompson’s own evidence that she was not sufficiently diligent in her mitigation efforts due to caring for her ill mother at the time.

Punitive Damages
The Court awarded $25,000 in punitive damages based on the employer’s bad faith conduct in the manner of termination. Specifically, even after Ms. Thompson expressly advised the company that she considered herself legally entitled to additional notice at common law and that she would not release the company, the company continued to insist on receiving a release as a condition of making any payment at all. The company also refused to respond to Ms. Thompson’s request for clarification as to how they had calculated the termination pay, which the court found deprived Ms. Thompson of her ability to make an informed assessment of her legal position. The court determined the company did these things in an ongoing attempt to pressure Ms. Thompson. In doing so, the company acted reprehensibly and punitive damages were awarded to deter such conduct.

Takeaways for Employers
This case serves as a cautionary tale and reminder to employers about the obligation of good faith in the manner of termination. Insisting that an employee provide a release of claims in exchange for statutory minimum requirements (which employees are entitled to receive unconditionally), or refusing to provide an employee with a breakdown of their termination pay, is the sort of behaviour that can lead to additional liability in wrongful dismissal litigation.

This case further demonstrates how a restrictive covenant agreement is a factor that can be considered in the court’s assessment of reasonable notice. In this case a non-managerial account manager with just over 3 years of service was awarded damages based on a six month notice period – the existence and aggressive enforcement of restrictive covenants were relevant to the court’s assessment of reasonable notice, as the contract did not have a termination provision.

If you have any questions, please contact your Harris lawyer.