Wrongful dismissal cases can involve more than a person seeking payment of additional pay in lieu of notice; they can also include a claim for other kinds of damages, including moral damages.

Moral damages are those that flow from the manner of dismissal; if the conduct of the employer is held to be unfair or in bad faith causing the employee to experience mental distress (see Keays v. Honda Canada Inc., 2008 SCC 39 @ para. 59), these additional “moral damages” may be ordered. Moral damages are an exception, not the rule: the normal distress and hurt feelings that result from a dismissal are not ordinarily compensable.

Damages can also be ordered for breaches of the Human Rights Code. A recent decision of the Ontario Court of Appeal examined whether Code-related damages and “moral damages” were one and the same, and how they might differ.

The employer Zochem Inc lost at trial and was ordered to pay moral damages to its ex-employee Doyle. The employer appealed, asking the Court of Appeal to reduce the amount of moral damages awarded by the trial judge by the amount of damages assessed for breach of the Ontario Human Rights Code (the “Code”). Essentially Zochem argued that the same conduct underlay both awards and should not be double compensated.

In its ruling (Doyle v. Zochem Inc., 2017 ONCA 130) the Ontario Court of Appeal disagreed with the appellant, holding that while there was an overlap in the conduct relating to the two awards, the conduct was not identical. The court acknowledged that it must avoid the pitfall of double-compensation; however, moral/aggravated damages are properly separated from awards for breach of the Code.

Damages for breach of the Code need not be linked to the manner of termination, the Court held, and are awarded as compensation for loss of the right to be free from discrimination, i.e. sexual harassment in the workplace. In the Doyle decision the Ontario Court of Appeal held that the awards in question vindicate different interests in law and accordingly there is no overlap in the damages awarded. As a result the moral damages in the amount of $60,000 were not reduced by the $20,000 damage award for breach of the Code.

A similar result was obtained in last year’s Ontario Court of Appeal decision in Strudwick v. Applied Consumer & Clinical Evaluations Inc., 2016 ONCA 520. In that case the Court acknowledged the possibility of some overlap between damages; however, it went on to hold that the extreme bad faith and unfair treatment of the employee in the manner of dismissal ought to result in a separate aggravated damages award of $70,000 in addition to the $40,000 awarded for breach of the Code.

In Strudwick, the Motions Court judge had increased the number of months awarded to the Plaintiff for reasonable notice under the heading of “Wallace damages”. The Ontario Court of Appeal rejected this approach and also reduced the aggravated damages award by this same amount. (Note that in the Strudwick decision, the Ontario Court of Appeal also awarded damages for wrongful dismissal, damages for intentional infliction of mental distress and punitive damages.)

In the Keays v. Honda decision, Justice Bastarache was careful to explain the distinction between punitive damages which are intended to punish and aggravated damages which are intended to compensate. In that decision the Supreme Court of Canada made clear that courts should question:

“…whether the allocation of punitive damages was necessary for the purpose of denunciation, deterrence and retribution, once the damages for conduct in dismissal were awarded.”

Given that the conduct giving rise to punitive damages will likely be the same conduct giving rise to other heads of damage, there is necessarily an overlap and it will be up to the court to determine whether compensatory damages are insufficient to respond to the Defendant’s conduct.

The upshot for employers contemplating termination of an employee is as follows:

  • behaviour by the employer and its management during the termination process, will be carefully scrutinized for bad faith or unfairness;
  • even if that behaviour is not “discriminatory” under the Code, it can give rise to humiliation and other forms of injury to the affected employee;
  • Courts are willing to order compensation for such injury;
  • where the individual also has a human rights complaint, separate damages for suffering discrimination are available and will not automatically be deducted from moral damages resulting from simple bad behaviour.

The ultimate way to avoid these problems, is for employers to adopt a scrupulously respectful practice – including legal advice and a checklist of steps – when carryout out the termination of an employee.