Employers are obligated by law to treat their employees fairly and to act in good faith.
What Makes a Termination Bad Faith
Employers have a legal obligation to act in good faith when terminating an employee. If an employer does not discharge this duty properly, the employee may have grounds to sue the employer for a bad faith termination. The Supreme Court of Canada established in the landmark 1997 decision, Wallace v. United Grain Growers Limited, that employers must be candid, reasonable, honest and forthright with their employees, and should refrain from engaging in conduct that is unfair, untruthful, misleading or insensitive. Even if the termination was otherwise legal or valid, the employer may still have liable for damages if the manner of dismissal shares the above characteristics.
Examples of bad faith conduct include the employer making declarations that result in an attack on the employee’s reputation, misrepresenting the employee’s reason for leaving, or terminating the employee to deny them a right such as a pension benefit.
The employee has the burden of proving that the employer engaged in bad faith conduct during the termination process.
When an employer acts in bad faith during the termination process, an employee may be entitled to damages. These damages are meant to compensate the employee to offset their losses rather than act punitively as a deterrent for an employer’s poor conduct. Importantly, the burden of proving that the losses were cause by the bad faith conduct belongs to the employee, not the employer.
In the past, the penalty for an employer violating their duty to dismiss in good faith was simply an increase in the length of the notice period provided to the terminated employee. That changed in 2008, when the Supreme Court of Canada held in their 2008 decision, Honda Canada Inc. v. Keays, that bad faith awards are to be considered separately from a notice award. Thus, it is no longer calculated by adding it to the determined notice period.
The Supreme Court’s rationale was that bad faith dismissals and resulting losses could cause psychological damage and mental distress. This is separate from the basic economic losses stemming from a wrongful dismissal. Therefore, the employee must show (again, the employee has the burden of proof) that the manner of dismissal caused mental or psychological damage in order to receive a damage award for bad faith conduct.
How Bad Faith Damages Are Determined
Stacey Ball of Ball Professional Corporation was the lawyer acting on behalf of the winning party in the landmark case, Wallace v. United Grain Growers Ltd.. It was in this decision, with the help of top Toronto employment lawyer Stacey Ball, that the employer’s obligation of good faith and fair dealing in the manner of dismissal was created. The court stated, at paragraph 98, that although the obligation of good faith and fair dealing is incapable of precise definition, at a minimum, it should require: “in the course of dismissal employers ought to be candid, reasonable, honest and forthright with their employees and should refrain from engaging in conduct that is unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive.” [Emphasis added]
Thanks to the obligation of good faith and fair dealing, an employer in violation of the obligation could be liable for a separate quantum of damages, entirely independent of damages for reasonable notice. Bad faith discharge or discharge for bad faith can therefore create an actionable wrong in its own right. However, it is noteworthy that bad faith discharges or breaches of the implied obligation of good faith and fair dealing in the manner of dismissal are not all equally injurious. A trial judge must, in each case, examine the nature of the bad faith conduct and its impact.
The employer’s duty of good faith and fair dealing has now been extended to not merely the termination of employment, but the existing relationship prior to termination. See Colwell v. Cornerstone Properties Inc.  O.J. NO. 5092 (SC). The breach of the implied obligation of good faith and fair dealing can provide the dismissed employee not only damages for mental distress and loss of reputation, but also economic losses engendered by the manner of the dismissal.
Following the Wallace decision, the Supreme Court of Canada decided Honda Canada Inc. v. Keays. Here, it was decided that bad faith discharges or breaches of the implied obligation of good faith and fair dealing should not result in an extended notice period (as was the conclusion in Wallace) but should instead lead to foreseeable compensable damages not subject to mitigation. Notwithstanding this, it is possible that a reasonable notice period could be extended where the manner of dismissal renders one unemployed or unemployable for a longer period of time than they otherwise would have been.
Examples of Bad Faith Discharge: Breach of Duty of Good Faith and Fair Dealing in the Manner of Dismissal
The following are examples of circumstances in which an employer’s conduct was found to have breached the duty of good faith and fair dealing in the manner of dismissal:
- In Martin v. International Maple Leaf Springs Water Corp., the reasonable notice period was extended by three months because the employee was dismissed for reasons which were not true. The employee’s reputation was tarnished through false accusations of dishonesty and alcohol abuse;
- In Bailey v. Service Corporation International (Canada) ULC, an employee was awarded $25,000 in aggravated damages in addition to $110,000 in punitive damages because, among other reasons, the employer fired him when he was known to be sick and seeking medical care, not telling him he was dismissed, and not giving him a chance to respond to the unfair assumption that he had abandoned his employment. The employer also falsely alleged there was cause for dismissal, accusing the employee of being dishonest;
- In Acumen Law Corporation v Ojanen, an employee was awarded $50,000 in aggravated damages because the employer, among other things, fired her before offering her an opportunity to explain herself, accused her of deceit and dishonesty (accusations which were harsh and unwarranted), and fired her publicly in front of her classmates despite being able to do so privately instead;
- In Hamer-Jackson v. McCall Pontiac Buick Ltd., a reasonable notice period was extended by six months due to statements that were circulated in the used and new car industry against the dismissed employee;
- In Squires v. Corner Brook Pulp & Paper Ltd., a reasonable notice period was extended by six months where the employee was given no warning of their dismissal, was not given an opportunity to defend himself, and was threatened to be dismissed for cause if the employee refused to accept the employer’s settlement offer; and
- In Tannous v. Donaghue, an employee was awarded $15,000 in aggravated damages after being assaulted at the time she was dismissed by the owner of the company for whom she worked. According to the court, “the [employee] has suffered an actual extended period of disability that followed from the collective actions of the [employer] in the termination from her employment for which she will not be compensated”.
Arguments regarding bad faith discharges are not always successful. The employee has the burden of showing that their employer engaged in bad faith conduct or unfair dealings in the manner of dismissal, and that their injuries flow not from the dismissal itself but from the manner in which it was effected. Employees are not always successful in discharging this burden. Examples of circumstances in which a bad faith discharge was not found include:
- In Gaudio v. Banca Commerciale Italiana of Canada, there was no award of extended damages where the mental distress experienced by the employee stemmed from the fact they had been terminated and not from the manner in which they were terminated;
- In Clendenning v. Lowndes Lambert (B.C.) Ltd., an it did not necessarily follow that there would be a breach of the implied obligation of good faith and fair dealing where an employer makes unsuccessful cause allegations with a solid foundation in the evidence; and
- In Blondeau v. Holiday Ford Sales (1980) Ltd., extended damages were denied where an employer failed to communicate their intention of returning the employee to her job on a gradual basis, causing her to reasonably believe she had been constructively dismissed.
Having an experienced employment law counsel, such as Stacey Ball of Ball Professional Corporation, will make it far more likely that your claim of bad faith discharge is successful.
At Ball Professional Corporation we take the legal issues around Bad Faith Discharge very seriously and are committed to making sure your employment and Human rights are represented at the highest level and addressed in the most professional manner. We will work to minimize the cost to you by using our vast experience in negotiations while making sure you receive what you are legally entitled to according to Canadian employment law. Stacey Ball is one of the top employment lawyers in Toronto and represents clients across Canada. If you are not getting what you deserve, contact Stacey Ball to begin fighting for your rights, all the way to the Supreme Court of Canada if necessary, where Stacey Ball has fought and won protecting the interests of his clients on many occasions.
Canadian Employment Law
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