In McFarlane v. King Ursa Inc., 2025 ONSC 3553 , Justice Akazaki had a situation where an Exec VP with 4 years service making $317,000 before her maternity leave was offered upon her return a demotion to her previous position of Associate Partner & VP with a reduced salary of $210,000.
The Judge found this constituted a constructive dismissal . This aspect is not surprising given that the wage reduction was almost 30% and the failure to reinstate her to her former position was a violation of the ESA.
What is surprising is that she was awarded 12 months notice . This is what the Judge said
What struck me as the determining factor, aside from her age, length of tenure, and executive position, was the availability of comparable positions. King Ursa promoted the plaintiff rapidly into the senior position. Evidently, Ms. McFarlane acquitted herself both in terms of hard work and entrepreneurial energy. The fact that she could only secure contract work despite being an expert in marketing analytics meant she knew how to look for a comparable job but was unable to secure one. I appreciate there is a strong ex post logic to this reasoning, but I cannot ignore her inability to find comparable employment as a factor tipping the scales in favour of a longer term. I would therefore award damages based on a twelve-month notice period.
The second surprising aspect of this case was that the Judge awarded punitive damages of $40,000. This is what the Judge said :
The circumstances of her isolation from the company during the extended maternity leave contributed to a need for heightened sensitivity and professionalism in the negotiation or renegotiation of her compensation or severance, based on the company’s undeniably poor financial performance. These facts lead the analysis away from a discrimination claim and into the handling of the employee, for the purposes of the punitive and moral damages inquiry.
I appreciate the attempt to impose a salary cut was not to push her out but to implement a cost reduction scheme. However, there was no justification of imposing a demotion. The fact that the demotion may have arisen from a word processing error does not excuse the employer from the impact on the employee. Any employee, especially one whose executive status is closely tied to her identity and self-esteem, would react negatively to a document containing a demotion.
As to the quantum of moral damages, Doyle provides some guidance in that the range in employment law has been quite wide. In the circumstances where the demotion appears to have resulted more from carelessness than malice, I would assess the quantum in the middle of the range, in the amount of $40,000.00.
My Comments:
It seems what upset the Judge in this case was the demotion from Executive Vice President Media & Analytics to Associate Partner and Vice President .
In the opening paragraphs of the decision the Judge said:
Nevertheless, the attempt to demote her, separate from a reduction of her salary, had no economic basis and therefore could be construed as callous and unduly insensitive. The attempt to demote her struck the employee’s vulnerability as a person who had built her professional identity and status through thought and industry. I will therefore award Ms. McFarlane moral damages.
This employer would have been better off cutting her salary ( which is what the other working executives lived with) but not touching her title.
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