April 26, 2018

Gail Galea (“Gail”) began her career at Wal-Mart in 2002. Hailed as a “rising star”, and one of the mega-corporation’s MVP’s, it wasn’t long before she was known for her vigour, and her appetite for success. By 2010, Gail was expected to be appointed the role of Chief Merchandising Officer (“CMO”) for Wal-Mart Canada. She had all sorts of executive support behind her. She saw her name in flashing lights, and reasonably so – by 2008, she’d attend the Global Chief Merchandising Summit in Tokyo, and her grooming for the CMO role would shortly begin. That was, until a bleak meeting in January of 2010.

A brief history of Gail’s rise and fall to stardom goes something like this. In February 2003, Gail was promoted to the role of District Manager. By October, she became Regional Manager, Region 2. By May 2004, she had moved on up to Regional Vice President and by June, she was hand-picked for a nationwide training program targeting female associates with a “capacity and desire for senior executive roles in 3-5 years”. In September 2005, she was promoted to the role of General Merchandise Manager, and on acquiring the role, she was asked to sign a Covenant Not to Compete Agreement (“NCA”), which essentially provided, should the corporation terminate her employment at any time, without cause, Gail would be entitled to her base salary and any incentive payable in accordance with the Annual Incentive Plan in effect on the date of termination, and its portion of health and dental benefits premiums in accordance with such plans as are in effect on the date of termination.. In exchange, Gail would be bound by a two-year non-compete – which would make her entirely unemployable.

In September 2006, Gail was targeted by Wal-Mart’s head office operations in Arkansas, for further professional development. By 2007, she applied for, and was accepted, as the first Wal-Mart executive to ever receive membership to the Leadership Foundation, a division of the International Women’s Forum to which Hilary Clinton, Condoleezza Rice and Roberta Bondar were all faculty members. In the application, then President and CEO of Wal-Mart had this to say about Gail:

“Gail has the potential to move at least two levels of management up – to Senior Vice President and Chief Merchandising Officer. With education, experience and coaching, she could some day run a Wal-Mart country operation”

Before long, the letters from Wal-Mart’s COO, President, and CEO’s in 2008, praising and admiring her work, would begin to pour in. By 2008, Gail was responsible for 40% of Wal-Mart’s total sales, and 42% of its total profits in speciality Canadian parts. In April 2009, she was recognized as the only Canadian member of the President’s Global Council of Women Leaders. In 2008, and again in 2009, Gail received scores of “exceeded expectations” in all of her performance appraisals. And by October of that same year, she attended the Summit in Tokyo.

Gail got back from the Summit and prepared both her mind and future for what was to come. She’d become CMO and would reach her ceiling (for now). Little did she know, she would soon be pulled into her CEO’s office, demoted, and told that the corporation was about to take on a ‘corporate restructuring’.  Despite the bleak (at best) meeting of January 2010, Gail was informed that she continued to be a “valued member” of Wal-Mart and that a new role would be found for her. Only one month later, all promises faded, and Gail was appointed the role of Senior Vice-President Merchandising, Strategic Initiatives – a demotion. What followed for the next 10 months is what Justice Emery accurately described in his decision as Wal-Mart’s “deplorable” conduct. Over the course of 2010, the corporation began to lower Gail’s employee performance ratings without foundation, making her entirely ineligible for promotion. Despite her efforts in securing similar, or any, employment in the company across the world – her fate was predetermined. Within 8 months, she attended an 8-week pre-planned trip to Harvard University, for training. Upon her return, her personal effects had been removed from her office, and her phone disconnected. Within a week, Gail was offered a choice – demotion, or severance.

Gail began collecting severance on November 19, 2010. As agreed to in the NCA of 2005, her severance continued on a salary-continual basis, and Gail did not compete. However, the payments came to a raging halt, without explanation, after just 11.5 months –12+ months less than the agreed to time period contained in the NCA.

The Decision

On December 7, 2017, Justice Emery of the Ontario Superior Court of Justice delivered his written reasons in the litigation that lasted over 8 painful years. Gail was awarded $250,000.00 in moral damages; $500,000.00 in punitive damages; and her entitlements under the NCA, as well as benefits and other incentives relating to her employment. Justice Emery not only awarded the largest damage award in history, but he was candid in his judgment – including many of the arguments raised by Gail’s counsel, Natalie C. MacDonald of MacDonald & Associates. Justice Emery found that Wal-Mart had engaged in conduct so egregious, it had to be punished.

Moral Damages:

Relying on the leading decision of Honda Canada Inc. v. Keays (2008 SCC 39), Justice Emery affirmed that moral damages are available to a plaintiff where an employer has breached its duty of good faith in the manner in which the employee was dismissed, and the employer has engaged in conduct during the course of dismissal that was “unfair or misleading or unduly insensitive, and [failed] to be candid, reasonable, honest and forthright with the employee”. Where it was within the reasonable contemplation of the employer that the manner of dismissal would cause the employee mental distress, an employee would be entitled to moral damages. In addition, where the wrongful conduct of the employer caused the employee mental distress well beyond the degree of hurt which would accompany any normal dismissal, moral damages were appropriate.

While it has long been recognized that an employer’s conduct pre-termination and post-termination are properly the subject of an award for moral damages, Natalie C. MacDonald brought a motion before the Court to have Wal-Mart’s litigation conduct considered in the award. Although litigation conduct until now has been dealt with during the costs stage of litigation, Justice Emery held that “an exception [could] be made for moral damages to respond where the evidence proves on the balance of probabilities that an employer has acted in bad faith, and that bad faith is manifested by the decisions and conduct of an employer or counsel acting on the employers’ instructions to frustrate or deny the rights of an employee.” For the first time in Ontario’s history, litigation conduct was considered appropriate in quantifying an award for moral damages.

Ruling on the issue, Justice Emery held that over the final 10 months of her employment, Gail was made to suffer repeated humiliation – starting with the announcement of her re-assignment in January 2010. Wal-Mart made the decision to dismiss Gail 10 months before it announced the reality of its decision to her and by keeping her in “suspended animation”, it engaged in unduly insensitive conduct. In the interim, Gail valiantly sought alternative international positions, and was destined to fail. She was not only removed from her well-deserved role and demoted, but was literally precluded from advancing her opportunities as a result of the unfairly downgraded performance ratings which negatively affected her international opportunities. Wal-Mart’s performance reviews placed Gail in a “not currently promotable” category – setting her up for failure. In a final note, she was offered no explanation as to why Wal-Mart had ceased her salary payments.

In assessing Wal-Mart’s litigation conduct, Justice Emery held that Wal-Mart acted as an “unresponsive defendant who did not make full disclosure pursuant to the Rules of Civil Procedure to allow Ms. Galea to proceed with her claim in a timely fashion”. Furthermore, a series of documents relating to her performance reviews were not duly produced, and when produced, demonstrated that the performance ratings post-2010 were arbitrary. Wal-Mart did not answer undertakings until the eve of trial. The company was ultimately indifferent to “Ms. Galea or engaged in delay tactics, causing mental distress exceeding normal stress and hurt feelings that accompany a dismissal”. The Court awarded $200,000.00 to Gail for Wal-Mart’s pre and post-termination conduct, and an additional $50,000.00 for Wal-Mart’s litigation conduct. Justice Emery had this to say:

[276]        I agree with the submissions of Ms. MacDonald that Wal-Mart’s conduct with respect to the pace and disclosure process in the litigation originating from Wal-Mart as the party (as distinct from the instructions given to counsel for the conduct of the action itself) formed part of the manner of dismissal. See Antidormi, at para 155. Ms. Galea was entitled to a respectful and responsive approach to defending the action while Wal-Mart defended vigorously, not a deafening silence where indifference bordered on disdain towards her. Attrition is not friend of justice, nor should it appear to be.

[277]        It is for these reasons that I find that Wal-Mart’s conduct was misleading at best, and dishonest at worst, in the way the company treated Ms. Galea. Only Wal-Mart knew that Ms. Galea’s career was over long before she was actually terminated. To keep her in suspended animation was unduly insensitive conduct. The ten months she was left to seek a new foothold qualifies as a manner of dismissal that caused Ms. Galea mental distress and qualifies her for aggravated damages.

[278]        Galea is awarded $200,000 for moral damages. This amount is consistent with the decision of the Court of Appeal in Boucher v. Wal-Mart Canada Corp., 2014 ONCA 419 (CanLII) that upheld an award in that amount for aggravated damages.

It is important to note that the Court did not view Wal-Mart’s decision to remove Gail’s role and responsibilities in January 2010 as constituting bad faith. Rather, the treatment that she received from Wal-Mart between February and November 2010, amounted to overt evidence to make a finding of bad faith.

On the Punitive side:

Awards for punitive damages are rare, and are only awarded where a defendant’s conduct is malicious, intended to injure the plaintiff, and offends the Court’s sense of decency. Justice Emery, relying on the leading Supreme Court of Canada decision Whiten v. Pilot Insurance Co. (2002 SCC 18), found that Wal-Mart’s conduct leading up to dismissal was, “callous, highhanded, insensitive and reprehensible, deserving of an award for punitive damages. ….Wal-Mart did not just set [Ms. Galea] up to fail, but it built her up, and then let her down.” Wal-Mart acted in a mean-spirited way during the 10-month period pre-dismissal, by removing Gail from an important position, promising her new career prospects, and acting in a manner to defeat such aspirations which it had given to her. In addition, Wal-Mart had altered her performance ratings without foundation.

In applying Whiten, Justice Emery described the principle of proportionality as relating to the blameworthiness of the defendant’s conduct. In order to assess that blameworthiness and maintain the proper perspective, it was necessary to assess the degree of vulnerability of Gail, as well as the harm or potential harm directed to her. Other considerations included the need for deterrence, and other penalties paid by the defendant. Finding that the power imbalance including the ability of Wal-Mart’s then CEO to correct Gail’s performance ratings unilaterally, and his final act offering her a “choice” between a probationary position as Vice President E-Commerce or taking her severance, was beyond doubt. Wal-Mart’s indifference to the litigation process and the manner of dismissal on termination and over the course of the action further “highlight[ed] her vulnerability in significant ways”. Ultimately, the Court found no distinction between Gail’s claim for punitive damages against Wal-Mart for the reprehensible conduct of then President and CEO, and her claim for moral damages. The decisions post-January 2010 were all made on behalf of the company, and the fact that they occurred at such a high level within the executive offices at Wal-Mart and with such visibility amplified the damages necessary to chastise the company. With respect to its litigation conduct, Wal-Mart’s behaviour in “starv[ing] the plaintiff into a trial”, was reprehensible. Justice Emery considered the earlier decision against Wal-Mart in which punitive damages were awarded (note: Boucher v. Wal-Mart Canada Corp. (2014 ONCA 419)). He ultimately found that in this case, Wal-Mart’s conduct was even more egregious, and Gail deserved a higher award.

In addressing the defence relying on Boucher advanced by Wal-Mart, Justice Emery found that the conduct in question occurred at the highest executive level in Canada, and a high punitive award was necessary to deter Wal-Mart from conducting itself in a similar fashion against its employees in the future. Despite its large revenue, the “measure is what the appropriate amount of punitive damages should be to meet the objectives of denunciation and deterrence, in proportion to the other damages the court is awarding to the plaintiff that can be rationally justified.” In his final ruling, Justice Emery awarded $500,000.00 as against Wal-Mart for its egregious conduct.

Conclusion:

Although it has been a ride (8 years at that) many things post-Galea are clear. With respect to moral damages, Justice Emery has made it apparent that courts may consider an employer’s conduct during litigation in assessing moral damage awards applicable in a given case. In addition, when an employer’s egregious conduct warrants both punishment and deterrence – as it so vividly did in this case – punitive damages are acceptable, despite similarities in the facts applicable for both awards. Higher damage awards may be warranted where a dismissed employee held a more senior executive role, and the defendant’s corporate behaviour visibly demonstrates a need to “chastise”. All in all, the decision of Galea v. Wal-Mart Canada teaches us one major thing: employers must deal with their employees in good faith and dismiss them fairly, otherwise, as of 2018, there will be a Galea-sized price to pay.