Court Awards $240,000 in Wrongful Dismissal Damages against Embassy

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In a recent decision of the Ontario Superior Court of Justice, an embassy employee was awarded $240,000 in damages for wrongful dismissal.

Sandra McDonald was 57 years old at the time of her termination, and had been employed by the Embassy of the United States of America in Ottawa for 29 years. After receiving surgery and subsequently developing complex regional pain syndrome, Ms. McDonald exhausted all of her sick leave credits and went on long-term disability (LTD) beginning in November 2009.

While its previous policy had permitted employees on LTD to maintain their positions for the duration of their illnesses, in February 2010, the Embassy introduced a new policy, such that it would hold an employee’s position for only one year while the employee was on LTD. At the one-year mark, the employee would be terminated, unless the employee provided a medical statement assuring the employer of her/his fitness to return to work.

When the Embassy advised Ms. McDonald that it would hold her position for one year unless she provided a fitness to return to work statement before or at that time, it was informed by Ms. McDonald’s doctor that Ms. McDonald was not fit to work. Thus, in December 2010, the Embassy informed Ms. McDonald that she would be terminated effective January 31st, 2011, at which point she had been off work for approximately 19 months. However, Ms. McDonald did continue to receive LTD benefits after her termination.

Ms. McDonald brought a claim of wrongful dismissal. Despite having been served with the claim, American officials failed to file a defence or contest the claim at any point. Accordingly, the Ontario Superior Court of Justice issued a default judgment finding that, as alleged, the Embassy had wrongfully dismissed Ms. McDonald and had violated Ontario’s Human Rights Code by holding the positions of disabled employees for only 12 months. The Court awarded Ms. McDonald all of the compensation she had requested, including:

  • damages for a 32-month reasonable notice period (amounting to nearly $220,000);
  • $10,000 for pain and suffering as a result of the Embassy’s breach of the Human Rights Code;
  • over $4,000 for unused leave credits;
  • nearly $4,000 for out-of-pocket medical expenses;
  • her legal costs; and
  • interest.

Foreign Embassies enjoy substantial immunity from Canadian law. These immunities are detailed in the Canadian State Immunity Act. This legislation provides that foreign state departments and agencies, including embassies and consulates, are immune from the jurisdiction of Canadian courts. While an exception exists for a foreign state’s “commercial activities”, the Supreme Court of Canada has ruled that, in the employment context, this exception includes only the “bare contract for employment services”. Since most of the damages claimed by Ms. McDonald were not related to the enforcement of her employment contract and were instead based on the common law construct of reasonable notice and the statutory entitlements under the Human Rights Code, invocation of the State Immunity Act could have eliminated most if not all of the damages awarded against the Embassy.

In order to avoid the situation where sovereign immunity is overlooked by the courts, an embassy should always file a Statement of Defence which denies the allegations against it by seeking a ruling that sovereign immunity is applicable.

An embassy can also enter into formal employment contracts with staff, which detail their rights and obligations, both during the course of employment and at termination. These are “commercial contracts” under the State Immunity Act, and are enforceable by the employee, but set out precisely what the obligations are. Thus, embassies can terminate the employment of locally engaged staff knowing precisely what is payable to them. When properly drafted, such contracts are fully enforceable in Canadian courts and can help embassies to avoid awards such as the one in McDonald.

Therefore, while the McDonald decision demonstrates the potentially costly consequences of a wrongful dismissal claim against an embassy by locally engaged staff, there are many preventative tools and defences that are available to embassies in order to prevent such a situation.