The Divisional Court has set aside a Human Rights Tribunal of Ontario decision and found two principals of a now-defunct company liable for compensation in a marathon case that considers individuals’ liability for damages in human rights cases.
The tribunal previously awarded $30,000 to the complainant, Kathrine Farris, after finding her former employer, Staubach Ontario Inc., liable for engaging in sexual discrimination and creating a poisoned work environment.
But the tribunal ordered compensation only from Staubach, which is no longer operating. As a result, Farris had no effective remedy as she wasn’t able to go after the individuals employed by the company even though the tribunal found them liable as well.
In a ruling on June 29, the Divisional Court set aside the tribunal’s decision not to award joint-and-several liability against Harry McKeague and Michel Leonard, who are not only managers and principals but also the only two shareholders of the holding company of Staubach.
The decision may allow Farris to obtain compensation and has the potential to open the door for complainants to go after the owners and shareholders of defunct companies for human rights violations.
“I think it’s important that corporate liability not act as a shield against individual liability,” says Barbara Hall, chief commissioner of the Ontario Human Rights Commission.
“Sometimes, it’s just a corporation that’s found liable, but in this case, the finding was very clear about the individual liability of the managers. Yet when it came to damages, [the individuals] were not included and we believe they all should be liable.”
Hall adds: “The process is about making people take responsibility for their actions that are contrary to the code.”
In her view, the Divisional Court decision “sends a clear message to everyone, complainants as well as respondents, that people do have obligations under the code, corporate as well as individual.”
Farris began working as a real estate agent for Staubach in 1997. During her employment, she learned of rumours circulating that she was having an affair with McKeague. The tribunal noted the rumours were false and demeaning and related directly to Farris’ gender.
The tribunal also found other Staubach employees referred to Farris using terms that disparaged her on the basis of her sex, including calling her a “bitch,” “Farrasite,” “psycho,” “crazy,” and “HSC” (an acronym for “hateful spiteful cunt”).
Farris reported concerns about her work environment to her managers, McKeague and Leonard, but the harassment continued. The company fired Farris in 2003 on a without-cause basis.
The tribunal released its decision on May 20, 2011. It found Farris had been subjected to a poisoned work environment and that management had failed to take adequate steps to deal with it. It also found Farris was terminated contrary to the Human Rights Code.
While the tribunal ordered Staubach to pay $30,000, it didn’t hold McKeague and Leonard jointly and severally liable. The tribunal was aware that Staubach hadn’t been operating since November 2004.
“I think it’s really important that the tribunal takes this example of my claim as a real awakening that they have an obligation to protect and make human rights a very serious offence in Ontario,” Farris tells Law Times.
“If the tribunal showed more teeth and better capacity at doing their jobs, I think employers and employees will be better off.”
The Divisional Court pointed out a key conclusion at the tribunal was the finding that McKeague and Leonard didn’t recognize and address the poisoned work atmosphere and that this environment was a factor in Farris’ subsequent termination.
The Divisional Court said that “not recognizing and addressing a poisoned work environment is in and of itself a violation of s. 5(1) of the code.
Furthermore, it was Mr. McKeague and Mr. Leonard who decided to terminate Ms. Farris’ employment rather than address the poisoned work environment, a termination that the tribunal expressly found to be contrary to the Code.
Given their distinct and separate duties as managers to address the poisoned work environment and the fact that it was their decision to terminate Ms. Farris, any finding that their role was not ‘central’ in what occurred would be unreasonable.”
“When I was going to management, I felt management was in a position to do something about it,” says Farris. “If management isn’t going to take the appropriate action, then no one is protected.”
The court also wrote: “Given the overriding purpose of the human rights legislation, to provide a remedy to the complainant, it is on its face unreasonable for the tribunal to have limited its remedial relief to an award of damages against an inoperative corporation without providing a reason that specifically addresses its findings regarding Mr. McKeague and Mr. Leonard.”
The court has remitted the case to the tribunal to apportion liability.
Farris has also brought a wrongful dismissal lawsuit. There’s no trial date for that action.
The Divisional Court decision could be relevant for other human rights claims where corporations no longer operate. One case is Terri-Lynn Garrie’s claim against her former employer, Janus Joan Inc.
Garrie, who has a developmental disability, worked for Janus Joan for 10 years, earning only $1 or $1.25 per hour throughout that time. The tribunal awarded Garrie $15,000 after finding the employer discriminated against her by firing her in October 2009.
The company also fired other workers with disabilities within a month but continued to employ workers without disabilities.
The company had reportedly closed with evidence before the tribunal that a new one with a similar name was operating in St. Catharines, Ont.
While the tribunal held the individuals in Farris’ matter liable, it didn’t do so against the individual owner of the company at issue in Garrie’s case.
Kate Stephenson, counsel for Garrie through the Human Rights Legal Support Centre, notes the “difficulty in Garrie is that the individual respondent is personally bankrupt, so proceedings against her are automatically stayed.
Had this not been the case, Farris could have been helpful to argue that the tribunal at first instance dismissed the application against her without giving proper consideration to the fact that the corporate respondent was known to have been shut down.
As it stands, the confirmation of the principle regarding the need for an effective remedy may be helpful in trying [to] trace the assets and management of the first company into the second.”
Not everyone believes the Farris decision will affect other human rights claims. “I don’t think there’s anything new or precedent setting about the Divisional Court decision,” says Arie Gaertner, counsel for McKeague and Leonard.
He says the decision reconciles the facts in this case with existing human rights legislation. The more unique aspect to Gaertner is how long this case has taken.
The complaint began in 2003 and involved more than 58 days of evidence as well as additional days for submissions.