China Southern Airlines hit with $100,000 in punitive damages after alleging cause in B.C. worker’s termination

A file photo of an airplane at a gate, with another jet taking off in the background. Photo: HR Law Canada/Canva

An airline controlled by the Chinese government has been ordered to pay $100,000 in punitive damages to a long-term worker in British Columbia it repeatedly demoted and fired, alleging “time theft” and incompetence.

That’s on top of $50,000 in aggravated damages for bad faith in how the dismissal was handled, and 20-months’ reasonable notice for wrongful dismissal for total damages approaching $210,000 before costs.

Series of demotions and a just-cause dismissal

Paul Chu began working for China Southern Airlines on an informal basis in 2008, and was hired on full time in 2011. From that point, until 2018, he was the airline’s marketing and business development manager.

CSA is a Chinese company, headquartered in Guangzhou and controlled by the Chinese government, the Supreme Court of British Columbia said.

In March 2018, Chu was demoted to a customer service role, working at the reception desk of CSA’s downtown Vancouver office. His pay was cut by 25 per cent. He was demoted, again, in October 2018 and assigned to work at Vancouver International Airport as an airport services worker.

On Feb. 1,2019, Chu was terminated for cause. In the termination letter, CSA alleged incompetence in his work at the airport and “time theft.” No specifics of the time theft were provided.

Chu sued for wrongful dismissal, and sought aggravated and punitive damages based on the airline’s breach of duty of good faith and fair dealing in the manner of his dismissal.

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Trouble began with new boss

Rui Zhang took over as the GM for the Vancouver operations in January 2018. Zhang had a different philosophy than her predecessor, and did not value the relationship-building focused marketing efforts that Chu was involved with. (Nor did she get along with the former GM, according to the court.)

Zhang was dismissive of Chu’s role and responsibilities, and embarked upon a campaign “designed to manufacture cause for dismissal or induce (him) to resign,” the court said.

There were no complaints about Zhu’s work before Zhang took over. But that changed in February 2018 when the company began criticizing his work, issuing reprimands accompanied by threats of dismissal and carefully documenting disciplinary measures with “self-serving records,” the court said.

That month, Chu was disciplined for attending industry events, allegedly without prior approval.

First demotion

In March 2018, he was transferred to a front-line service position in the sales department as a customer service rep. His title was “account manager” — same as other sales staff — and he was placed under the supervision of a sales manager who was at the same level as his former marketing role.

CSA unilaterally cut his pay from $3,890 per month to $2,940 per month, a reduction of about 25 per cent. He was required to learn and apply CSA’s complex ticketing system, with which he had no experience, and given a thick codebook and told to learn it. (Another worker in the marketing department was also transferred at the same time to the same role. He quit in April 2018 and successfully alleged constructive dismissal, the court noted.)

“With limited training and time to learn, this was a practically impossible task,” the court said.

Second demotion

Chu was demoted again on Oct. 6, 2018, after further formalized discipline. This is when he began working at the airport as an operations worker. That role involved checking in passengers, creating reports, onboarding and deboarding operations and more. He had to learn the airport’s set of codes, which were also unfamiliar to him.

The CSA manager at the airport was unwelcoming, the court noted. She was not pleased at having to train Chu to do a job he had no familiarity with.

The airport work involved intense time pressures, and he was criticized for being too slow. In January 2019, at a meeting with several employees, Chu was told he was not performing up to standards and he was put on three months’ probation. He was told he would receive further training with another airport station worker.

CSA’s minutes of that meeting state that Chu voluntarily requested the training and “promised that if after one month, his test results do not meet the work requirements at the airport station, he will voluntarily resign,” the court said.

Chu denied saying that, but agreed he was to receive further training and would be tested again the following month between Feb. 16-18. But he was fired on Feb. 1.

Following the dismissal, Chu was unable to find alternate work. Now 71, he works as a delivery driver for DoorDash.

Airline expands cause allegations

Interestingly, the court noted that CSA was initially represented by legal counsel in this case. But, since Dec. 17, 2020, it has represented itself through “non-legally trained local employees.”

The Feb. 1, 2019, termination letter alleged “time theft” and “completely unacceptable performance.” But it responded to the court case with a much longer, and more serious, list of 17 allegations to justify dismissal. This included:

  • the former GM was aware that the plaintiff was not qualified for the role of “Business Development Manager”, that the plaintiff did not carry out such functions, and the plaintiff was not entitled to be paid as such;
  • the position of “Business Development Manager” was a sham created by the plaintiff and the former GM to defraud CSA and extract additional unauthorized compensation;
  • the plaintiff and the former GM conspired together to deceive and defraud the defendant;  
  • the nature of the plaintiff’s duties were “uncovered” when the new GM arrived, and “could not be continued” as they were “unauthorized and contrary to CSA policy,” which the plaintiff knew;
  • the plaintiff was transferred to a customer service position, which he was unable to perform;
  • the plaintiff was unable to perform his duties in the airport station position;
  • the plaintiff was guilty of sexual harassment, occurring in July 2017,  involving a female supervisor, and complaints from other female employees;
  • the plaintiff was guilty of theft (conversion) of several large model airplanes;
  • the plaintiff was repeatedly absent from work without good reason, arrived late, took long breaks, and left early;
  • the plaintiff engaged in dishonesty and breached CSA’s clear policies and procedures with respect to timesheets, leave policies, job descriptions.

The court said all the allegations were unfounded, other than perhaps the contention that Chu was unable to perform the duties of an airport services worker. But CSA knew or ought to have known that when he was reassigned, it said.

Shortly before trial, CSA abandoned a number of allegations including fraud, theft of the model airplanes and sexual harassment in the workplace. But it maintained the just cause dismissal for incompetence, misconduct and unauthorized absences from work.

The court’s ruling: Just cause

The Supreme Court of British Columbia said the fact Chu struggled in his work at the airport — being slow and making mistakes — was hardly surprising.

“(CSA) could not possibly have expected any other result,” the court said. “(CSA’s) conduct in assigning the plaintiff to this job and its subsequent treatment of him in relation to it was cruel and insensitive.”

The court shot down CSA’s claim of just cause, pointing to the allegations contained in the dismissal letter.

“I accept (Chu’s) uncontradicted evidence that they were all minor, unintentional mistakes, and that none of them resulted in any serious consequences,” it said. “The employer has failed to establish that any of these instances, alone or in combination with any other conduct it relies on, would be sufficient to constitute cause for dismissal.”

It also disregarded CSA’s claims around his attendance at industry events, his failure to submit flight route information to IATA and unauthorized absences.

“This is another meritless allegation manufactured by the employer in an effort to sustain its allegations of cause,” it said, referring to the time-theft claim.

Notice period: 20 months

The court awarded Chu 20 months’ notice for wrongful dismissal. It based the damages on his reduced pay of $2,940 per month — because he accepted the demotions and did not treat them as repudiation of his employment contract.

From that, it deducted $747 in income he earned moving boxes of PPE for National Cargo Services during the notice period. That was deducted from the award, leading to a total of $58,053.

It didn’t take into account any earnings at DoorDash as this occurred outside the notice period.

Aggravated damages awarded

The court said it had “no difficulty” concluding CSA breached its duty of good faith and fair dealing in the manner of Chu’s dismissal.

There was a laundry list of reasons cited. A sampling:

  • given his age, experience and former position, the reassignments without consultation to entry-level jobs were “humiliating”
  • rather than terminating him without cause when the new GM took over, it was “duplicitous and unfair” in its dealings with him
  • it concocted a memorandum falsely stating he would resign voluntarily resign if his performance didn’t improve
  • Chu, to the end, tried to live up to his obligations but was terminated before providing additional training and further training CSA promised
  • in the termination letter, CSA alleged dishonesty, falsely stating he was guilty of “time theft”
  • for no discernable reason, it refused to provide Chu with a record of employment (ROE), contrary to its legal obligations as an employer and despite repeated requests.

Significantly, it pointed to the airline’s Response to Civil Claim (RTCC), which made allegations of dishonesty, fraud, theft, conspiracy, sexual harassment and profound denigration and disparagement of his work record. The RTCC, the court noted, is a publicly available document.

Chu’s wife testified that his behaviour post-termination was abnormal.

“He was stressed, upset, lacked energy, became unsociable, gained weight, and his mood worsened. He became unhappy,” the court said.

“After he was fired, he did not know what to do with himself. He sat in his room for about a week. She said that lately, his mood has improved, now that he is working with DoorDash. She said he is starting to lose weight and is more active.”

It awarded $50,000 for mental distress suffered as a result of the manner of dismissal.

Punitive damages

The court noted that punitive damages are restricted to “advertent wrongful acts that are so malicious and outrageous that they are deserving of punishment on their own.”

It pointed to the unfounded allegations in the RTCC and the fact CSA required Chu to bring multiple pre-trial applications to enforce compliance with its obligations as a litigant.

“The record shows a pattern of conduct on the part of the defendant designed to stall and frustrate the prosecution by the plaintiff of his claims in this litigation, in circumstances where CSA must be taken to know that the plaintiff’s financial claims were modest, especially in relation to the high costs of litigation and his limited resources,” the court said.

“The description ‘hardball tactics’ easily applies to (CSA’s) behaviour both before and after his termination.”

It noted the combined total of reasonable notice and aggravated damages came to $108,053, which it called “relatively modest.” Those damages do not achieve the “objectives of retribution, deterrence, and denunciation applicable here,” it said.

It awarded $100,000 in punitive damages to Chu.

It also awarded costs, which was to be addressed separately.

For more information, see Chu v China Southern Airlines Company Limited, 2023 BCSC 21 (CanLII).