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Wrongful Dismissal Bad Faith Damages

It is stressful to be fired!  If the employee can show that the dismissal was not only wrongful but was carried out in bad faith, an employee may be entitled to additional damages upon termination apart from the requirement of reasonable notice. 

Usual damages for wrongful dismissal include compensation in lieu of notice, vacation pay, statutory holidays and other lost benefits.

But when the way the employee is treated during the dismissal is particularly reprehensibly,  harsh, disrespectful or, to use a Court’s term – “egregiously”, employees can collect additional or extraordinary damages called aggravated punitive or other damages. These are often referred to as Wallace or, now, Honda damages – arising from the Supreme Court of Canada decisions where such damages were discussed.

The basic premise is that employers must be “candid, honest, reasonable and forthright” with their employees, especially at termination when their employees are most vulnerable.  So if an employer shows bad faith in the termination process, it must pay additional damages.

In Wallace,  these damages resulted in a few additional months of termination being tacked on to the notice.  But the Supreme Court of Canada in June 2009 in a case called Honda v Keays stated that Courts could no longer arbitrarily extend the notice period by a few months without a correlation or a reason to do so.  Such damages are now only properly awarded if the employee can show that they have suffered mental distress going beyond the normal stress and hurt feelings that naturally arise from being terminated.  Bad faith means inflicting humiliation, embarrassment and damage to an employee’s self-esteem during the employment process.  It is “something akin to intent, malice or blatant disregard for the employee.”  It is conduct that can be characterized as callous and insensitive, or “playing hardball” [Gismondi v Toronto City].

The kinds of “callous treatment” surrounding termination that constitute bad faith include:

  • Making false accusations
  • Damaging the employee’s prospects for finding another job
  • Misrepresenting the reasons for termination
  • Firing the employee to deprive her or him of a benefit
  • Firing the employee in front of co-workers

No one is entitled to a job for life and sometimes employers must legitimately terminate an employee.  They cannot, however, rub salt in the wound.   Companies that behave with decency and show respect for employee’s feelings during termination will not incur these damages.

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