In recent years, there has been a notable increase in the quantum of damages being awarded in employment- related claims. In addition to damages for payment in lieu of reasonable notice, wrongfully terminated employees may be entitled to punitive or aggravated damages. Increasing damages are also being awarded in the context of human rights complaints. In a number of recent cases, employees have been awarded record setting damages. Clearly, the pendulum has swung towards higher damages, particularly in regard to aggravated and punitive damages. Employers should take note: latest decision and award trends seem to indicate that Canadian courts and tribunals are prepared to impose significant financial penalties on errant employers.
2. Notice Periods
It is well established that employers have an obligation to give employees notice of termination, unless there is just cause for immediate dismissal. Where there is no just cause for dismissal, employers must provide their employees with reasonable notice or payment in lieu thereof. The critical question to be asked when an employee has been dismissed is: what is the length of the reasonable notice period? To determine the amount of reasonable notice, courts will evaluate each case individually, having regard to the character of employment, the length of service of the employee, the age of the employee and the availability of similar employment, also
known as the Bardal factors.1 However, there have been some recent developments in the way in which courts
now assess reasonable notice periods.
(a) Is 26 Months the New Threshold?
The generally accepted upper threshold of reasonable notice in Canada has traditionally been 24 months. However, in the recent Ontario Superior Court case of Hussain v Suzuki Canada Ltd,2 a 35 year employee was awarded 26 months' reasonable notice. The case involved a 65 year old Assistant Warehouse Supervisor who had worked for Suzuki continuously for nearly 36 years. The employee had lost his job due to corporate
restructuring as a result of economic hardship. The court noted that the employee’s skills were general skills obtained on the job and were less marketable than skills that are the product of a definable trade, and that the employee was near the end of his working years. Although each of the Bardal factors on their own were not exceptional, the court held that the combination of factors amounted to exceptional circumstances that warrant a 26-month notice period.
Employers ought to take note: there is no cap on the amount of reasonable notice to which an employee may be entitled, since each case must be considered on its own merits. If a court finds that “exceptional circumstances” exist in any given case, an employer could be on the hook for a large sum of money, totalling more than 24 months reasonable notice.
(b) The Old “Rule of Thumb”
Traditionally, there was a “rule of thumb” applied in employment law. According to this rule, a terminated employee was entitled to one month of reasonable notice per year of service. Although the rule has the benefit of being predictable, certain and easy to apply, it is clear that there is no longer a true “rule of thumb” for determining how much notice an employee is entitled to upon termination. The courts have made it clear that
1 Bardal v Globe & Mail Ltd,  OJ No 149 (Ct. J).
2  OJ No 6355 (SC).
each case is to be assessed based upon its own particular circumstances. The Ontario Court of Appeal in Minott v O’Shanter Development Company Ltd3 held that the rule of thumb approach suffers from two deficiencies: “it risks overemphasizing one of the Bardal factors, length of service, at the expense of the others; and it risks undermining the flexibility that is the virtue of the Bardal test.”4 As such, it is clear that there is no single measure to determine the amount of reasonable notice that an employee is entitled to.
More recently, the Saskatchewan Court of Appeal in Capital Pontiac Buick Cadillac GMC Ltd v Coppola5 held that the rule of thumb was no longer supported by the majority of cases. Furthermore, the court stated that “while employers may wish to use the one month’s notice per year of service rule of thumb as a guideline in their day-to-day decision-making given its apparent facility, they do so at their own peril because the rule is not
supported by the jurisprudence and is inconsistent with Bardal.”6 As such, employers should resist the
temptation of identifying an easy way to calculate notice periods. At common law, calculating notice periods requires a contextual analysis taking into account several factors, with each case determined on its merits. There are no hard and fast rules.
3. Trend: Increase in Damages Awards
In 2008, the Supreme Court of Canada in Honda Canada v Keays7 redefined the law of damages in the context of employment. In particular, the court held that extending the notice period was not an appropriate way to compensate for manner of dismissal, and that punitive damages were restricted to cases of wrongful acts that were so harsh, malicious and reprehensible so as to justify punishment and denunciation. As a result of this case, it was thought by many that extended awards and punitive damages were effectively no longer available in wrongful dismissal cases. However, recent cases suggest that aggravated and punitive damages are far from dead. Importantly, this trend of increased aggravated and punitive damages is not limited only to wrongful dismissal claims, but also arises in the context of Human Rights Tribunals. Also of significance is the fact that previously, large punitive awards tended to be jury awards, and appellate courts, for the most part, had either significantly reduced or eliminated punitive awards. As the cases below demonstrate, judges are now prepared to impose significant punitive awards, and appellate courts are increasingly willing to uphold them.
The object of punitive damages is to punish an employer in order to deter future unfair conduct. Punitive damages are not aimed at compensating the employee. These damages are exceptional and are awarded only when the employer’s conduct is deserving of punishment because it is harsh, vindictive, reprehensible and malicious.8 In the employment context, aggravated damages may be awarded to compensate an employee
when the circumstances of dismissal are insensitive, demeaning or humiliating. Employers are held to an obligation of good faith and fair dealing in the manner of dismissal.9 Aggravated damages are compensatory in nature (not punitive), and are awarded when the plaintiff’s actual injuries have been aggravated by the defendant’s behaviour.10
The following cases provide some sobering examples of recent awards.
3  OJ No 5 (ONCA).
4 Ibid at page 21 (QL).
5 2013 SKCA 80.
6 Ibid at para 22.
7 2008 SCC 39.
- Ibid at para 68.
- Boucher v Wal-Mart Canada Corp, 2014 ONCA 419 at para 67.
- Lewis Klar, Tort Law, 4th ed (Toronto: Thomson Canada Limited, 2008) at 121.
In Higginson v Babine Forest Products Ltd and Hampton Lumber Mills Inc,11 the employee worked for the employer for 34 years prior to the termination of his employment. He had worked as an electrical supervisor in a sawmill where the closure was imminent. The employee took the position that his employer’s allegations of just cause for termination were an attempt to avoid providing him with reasonable pay in lieu of notice. The allegations of just cause failed and the employee was granted 24 months’ notice, with some deduction for failure to mitigate. A jury awarded the employee $236,000 in compensatory damages for wrongful dismissal and
$537,000 in punitive damages. This was the highest award of punitive damages in a Canadian wrongful dismissal case at the time, until Boucher v Wal-Mart12 (discussed further below).
The Federal Court of Appeal in Tipple v Canada (Attorney General)13 addressed the issue of damages when the employee experienced loss of reputation arising from the suggestion that his employment was terminated due to misconduct. The adjudicator awarded approximately $1.4 million in damages to the former employee, including: nearly $690,000 for lost wages, $110,000 for lost performance bonus, $110,000 for lost benefits,
$125,000 for psychological injury, $250,000 for loss of reputation and over $45,000 for obstruction of process. The adjudicator found that the employer’s actions had contributed to the employee’s damages, and the employer had not taken steps to minimize the damage to his reputation that they should have taken. On judicial review, the Federal Court set aside the award of damages for psychological injury, loss of reputation, and obstruction of process. The court believed the employee was entitled to moral damages, but felt that the amount was too high and sent the matter back to the adjudicator to be reassessed. On appeal, however, the Federal Court of Appeal accepted that the employee’s reputation was damaged by false accusations related to his termination and restored the $250,000 award for loss of reputation. In doing so, the Court of Appeal held that damages for loss of reputation stemming from a wrongful termination are available where: (a) the employee’s reputation is damaged by public knowledge of false allegations relating to the termination; (b) the employer fails to take reasonable corrective steps and offers no reasonable excuse for such failure; and (c) the damage to the
employee’s reputation impaired his or her ability to find new employment.14
A self-represented litigant in Kelly v Norsemount Mining Inc15 achieved a significant punitive damage award of
$100,000. The employee alleged that he was dismissed because he insisted on compliance with securities regulations. The employer, on the other hand, alleged the employee was dismissed for cause on the basis of fraud and incompetence. The employer maintained those allegations for seven years, and threatened to bankrupt the employee in an attempt to dissuade him from pursuing his legal rights. In awarding punitive damages, the British Columbia Supreme Court held that the employer breached its duty of good faith and conducted itself both at the time of termination and afterwards in a manner that could be described as harsh, vindictive, reprehensible and malicious. The court further determined that since the general damages award was relatively small, an additional and significant award of punitive damages was necessary to effectively deter the employer.
Interestingly, in Morgan v Herman Miller Canada Inc,16 the Human Rights Tribunal of Ontario awarded damages of $70,000 to a former employee, despite finding that no discrimination had occurred. The Tribunal determined that the employee had not established on a balance of probabilities that he was assigned menial and demeaning tasks because of his colour. The employer eventually terminated the employee alleging just cause on the basis that the employee’s “campaign of misinformation” caused unnecessary alarm amongst co-workers. The Tribunal held that the employer’s decision to terminate the employee’s employment was made as a reprisal for expressed concerns about harassment and discrimination. As such, the employee was awarded 14 months’ lost wages and $15,000 as damages for injury to dignity, feelings and self-respect. It was further ordered that
11 2010 BCSC 614.
12 Supra note 9.
13 2012 FCA 158.
14 Ibid at para 16.
15 2013 BCSC 147.
16 2013 HRTO 650.
the employer have its human rights policies reviewed and its managers trained in their application. In addition, the individual manager responsible for the termination was directed to undergo human rights training (despite the fact that the manager was no longer with the employer).
The British Columbia Human Rights Tribunal decision of Cassidy v Emergency Health Services Commission (No 5)17 is particularly significant in the context of damages, not for the size of the award, but for the fact that the individual manager was held jointly and severally liable. The employee, who had multiple sclerosis, worked as a paramedic. As a result of his disability, he was not able to manually palpate a pulse. The Tribunal found both the
employer and the manager liable for failing to accommodate the employee after his suspension from duty. Not only did the manager fail to support the employee in his search for accommodation, the Tribunal also noted that the manager took steps intended to thwart the employee’s efforts to be accommodated and actively sought to keep the employee out of an ambulance. This conduct justified a finding of personal liability against the manager. As such, the Tribunal awarded $22,500 for injury to dignity, feelings and self-respect, as well as damages for lost wages and benefits. These damages were payable jointly and severally by the employer and the manager. This means that both parties were responsible for the full amount of the obligation.
In Walsh v Mobil Oil Canada,18 the employee filed a complaint with the Alberta Human Rights Commission alleging discrimination on the basis of gender over a period of several years. The employee was initially hired as a junior map clerk, and although she received several promotions while working for the employer, she also faced serious gender discrimination. Neither her pay scale nor her designations kept pace with her actual responsibilities, her abilities, her education, or the pay and designations of her male peers. When the Alberta Human Rights Tribunal dismissed the employee’s first complaint, the employer terminated her employment claiming it had cause to do (this claim was later rejected by the Court of Queen’s Bench). The exclusive focus of the Alberta Court of Appeal in this decision was about remedy. In considering the appropriate award for general damages, the court noted that in Alberta there is no statutory limit on the amount of damages available for mental distress, injury and loss of dignity flowing from discriminatory conduct. The Court of Appeal upheld the lower court’s award of $25,000, but reasoned that the award was on the low end of what was appropriate in the circumstances, given the wilfulness of the employer’s conduct, the duration of the conduct, the damaging impact on the employee, and the untenable position that the employer maintained throughout the litigation that the employee was terminated for cause.
In Tl’azt’en First Nation v Joseph,19 the Federal Court gave further direction about when it is appropriate to award aggravated and punitive damages. The employee was employed by the First Nation for more than 30 years prior to his dismissal. After the employee sent a letter to the executive director criticizing his management style, the executive director began to target the employee with unsupported claims of fraud and mismanagement. As a result of the threatening and harassing conduct, the complainant’s health deteriorated to the point that he was compelled to take medical leave. While on medical leave, the executive director proceeded to widely distribute accusations of criminal wrongdoing, insubordination and sexual assault of another employee. The employee was then fired without notice. With regard to aggravated damages, the Federal Court reasoned that the adjudicator awarded the aggravated damages flowing from the manner in which the employee was dismissed, and that $85,000 was entirely justifiable given the heavy handed conduct in this case. With regard to punitive damages, the court further reasoned that $100,000 was justifiable as the employer’s conduct was reprehensible, dishonest, malicious, deliberate, despicable, deceitful and in bad faith.
17 2013 BCHRT 116.
18 2013 ABCA 238.
19 2013 FC 767.
The Ontario Court of Appeal recently rendered a decision in Pate Estate v Galway-Cavendish and Harvey (Township)20 where it held that significant punitive damages were appropriate. The case involved a building inspector who was dismissed without notice. The employer alleged that the employee kept permit fees. The employee was criminally charged and eventually acquitted. It was later determined that the employer had
withheld exculpatory evidence from the police, and the court concluded that had this evidence been provided to the police, the former employee would not have been criminally charged in the first place. Although the trial award of punitive damages was reduced from $550,000 to $450,000, this is the second largest punitive damages award to survive review by an appellate court in the employment law context.21 This case is significant
not only because of the size of the award, but also because the original award was by a trial judge and not a jury. The Supreme Court of Canada refused leave to appeal.
In keeping with the trend of damages awards increasing, in IBM Canada Limited v Waterman,22 the Supreme Court of Canada confirmed that employers may not deduct earned pension benefits from wrongful dismissal damages. The employee had been a long-time member of IBM’s defined benefit pension plan and had a fully vested interest in the plan when he was terminated without cause with two months’ notice. Both his employment contract and the plan were silent on employee rights and entitlements in the event of termination without cause. The Supreme Court determined that the private insurance exception applied in this case, which provides that payments from private insurance are not typically deductible from damage awards. Furthermore, the contract of employment did not contain any general bar against receiving full pension entitlement and employment income. The court also considered broader policy objectives and, in particular, was concerned that allowing the deduction would create an economic incentive for employers to dismiss their pensionable employees before other employees. Though this case holds that pension payment should not typically be deducted from wrongful dismissal damages, the Supreme Court has left open the possibility for employers to expressly stipulate in the employment agreement that wrongful dismissal damages and pension benefits will not be paid simultaneously.
Since this case was decided in 2013, it has already been applied in several decisions.23
In The City of Calgary v CUPE Local 38,24 an employee of the City of Calgary’s Roads Division was repeatedly sexually assaulted by a senior employee, including repeated fondling while she was at her desk. When the employee reported the assaults to her manager, his solution was to install an extension on the employee’s desk to make it more difficult to approach her from behind. At a meeting with the manager, the employee described the assaults and provided stills from a spy camera she had installed, however, the manager found the evidence to be inconclusive. She subsequently went on a stress-related medical leave of absence and was hospitalized twice for contemplating suicide. An independent medical examination concluded that the sexual assaults and their aftermath were the primary causal factors of the employee’s psychological difficulties and would require extensive treatment to improve her functioning. The Arbitration Board awarded the employee $125,000 in general damages, as well as over $700,000 for damages for loss of income, on the basis that the city’s failure to respond to the situation resulted in a serious and life-altering adverse impacts. Interestingly, the Board declined to award punitive damages, observing that punitive damages are only awarded when the compensatory damages are insufficient to accomplish the purpose of retribution, deterrence and denunciation, and in this case, significant compensatory damages were already awarded.
20 2013 ONCA 669.
21 The largest punitive jury award in an employment law case to survive appeal was in McNeil v Brewers Retail Inc, 2008 ONCA 405. The jury awarded $500,000 in punitive damages and the Ontario Court of Appeal upheld the award.
22 2013 SCC 70.
- Morris v ACL Services Ltd, 2014 BCSC 1580; Lethbridge Industries Ltd v Alberta (Human Rights Commission), 2014 ABQB 496; and Liu v Everlink Services Inc, 2014 HRTO 202.
- 2013 CanLII 88297 AB GAA.
The decision of Kelly v University of British Columbia (No 4)25 is significant, as the British Columbia Human Rights Tribunal awarded the complainant $75,000 in damages for injury to dignity, which is more than double the previous highest award for this type of injury set in 2008.26 The complainant was a medical resident at UBC Medical School. He suffered from ADHD and had a non-verbal learning disability. After failing his first rotation in
the residency program, he disclosed his disabilities and was asked to see a psychiatrist. In 2007, the complainant was dismissed from the family medicine residency program for unsuitability. In making the award for injury to dignity, the Tribunal noted the following factors: the effect of the termination on the complainant’s ability to fulfill his lifelong dream of practising medicine; the humiliation and embarrassment he experienced when he was forced to seek employment in medicine-related fields; the impact on his personal life; and the fact that he was in a vulnerable position in that he was a student who had a disability. This case may signal the court’s increasing willingness to increase this kind of damages award in the future.
In Boucher v Wal-Mart,27 the jury awarded the largest punitive award in an employment law case in Canada, however, this award was subsequently reduced on appeal. The former employee complained that her relationship with her immediate supervisor turned sour after an incident in May 2009 in which she refused to falsify a temperature log. The employee alleged that this caused the manager to be mentally abusive towards her, criticizing, demeaning and humiliating her in front of other staff. When the employee complained of her supervisor’s conduct to Wal-Mart’s senior management, she was told that her claims were unsubstantiated. Wal-Mart did not take any action against the supervisor. At trial, the jury found that the employee had been constructively dismissed and awarded $1 million in punitive damages and $200,000 in aggravated damages as against Wal-Mart, and $100,000 for intentional infliction of mental suffering and $150,000 in punitive damages as against the supervisor personally. The Ontario Court of Appeal reduced the punitive damages against the supervisor on the basis that since the other damages were so high, the compensatory award carried a strong punitive element. As such, the supervisor’s punitive damages were reduced to $10,000 and Wal-Mart’s punitive damages were reduced to $100,000. Although the Court of Appeal reduced the portion of the award representing punitive damages, it upheld other aspects, leaving the employer liable for a large sum of money. Employers ought to be aware that failing to address bullying and harassment in the workplace could lead to a claim for constructive dismissal and may itself constitute conduct causing mental distress that can give rise to an award for aggravated damages.
As we can see, while all of these cases have different facts, the result is often the same: courts are increasingly willing to punish employers for what the court views as poor conduct in the course of the employment relationship and following termination.
4. Practical Considerations for the Workplace
The cases explored in this paper help to illustrate the extent to which Canadian courts and Tribunals are prepared to award extensive damages against errant employers. The old “rule of thumb” no longer applies, and employers should not think that previous maximums awarded by courts will protect them from further liability. However, there are steps employers can take to limit potential damages that may be awarded against them.
As a starting point, employers should include clear and concise termination clauses in their employment contracts, limiting notice periods or payment in lieu of notice. In order to increase the enforceability of these clauses, employers should consider tailoring those clauses to the circumstances. For instance, in the case of a lower level employee, the minimum amounts set out in employment standards legislation may be appropriate.
25 2013 BCHRT 302.
- The previous highest damages awarded for injury to dignity was $35,000, awarded in Senyk v WFG Agency Network (BC) Inc, 2008 BCHRT 376.
- Supra note 9.
However, in the case of a higher level employee, consider using a formula for calculating notice periods that includes a maximum amount payable. In addition, in cases where a departing employee signs a release following termination, it is important that the release is clear and concise, and that the employer is forthright when presenting it to the employee.28 Where a court is satisfied that the release is drafted using simple plain
language and it was clearly explained to the employee, it is likely that an employer can limit liability for any future claims raise by the former employee.
The importance of setting out each party’s entitlement in the employment contract cannot be understated. For instance, as stated previously, in IBM Canada Limited v Waterman,29 the employment contract was silent on rights and entitlements in the event of termination without cause. Though this case held that pension payments should not typically be deducted from wrongful dismissal damages, the Supreme Court left open the possibility
for employers to expressly stipulate in the employment contract that wrongful dismissal damages and pension benefits would not be paid simultaneously.
Following the termination of an employee, employers should think carefully before asserting just cause. Allegations of just cause should not be maintained throughout litigation, unless an employer is prepared to fully substantiate those claims. Otherwise, a court may consider this as a factor when assessing the damages awarded to the former employee. For instance, in Walsh v Mobil Oil Canada,30 the fact that the employer
maintained throughout the litigation that the employee was terminated for cause, even though this was entirely unfounded, was a factor in the court determining that the lower court’s damages award was on the low end of reasonable. Further to this point, employers ought not to take steps that have the effect of damaging an employee’s reputation in the community. As seen in Tipple v Canada (Attorney General),31 the Federal Court of
Appeal accepted that the employee’s reputation was damaged by false accusations relating to his termination, and awarded $250,000 for loss of reputation.
In addition, employers must not underestimate the importance of investigating employee claims thoroughly and promptly. It is essential for employers to have an investigative process; not only can it identify potential situations giving rise to a need for action or accommodation at an early stage, but it can also lead to an effective resolution of workplace issues. Workplace investigations relied upon by employers in subsequent civil or human
rights proceedings will be subject to intense scrutiny. As we have seen, in City of Calgary v CUPE Local 38,32
the Arbitration Board awarded over $800,000 in damages, largely due to the city’s failure to respond to the employee’s complaints. In that case, the employee was sexually assaulted several times by her supervisor, both before and after she made her initial complaint. Employers must take note: if you receive a complaint, treat it seriously!
It is clear that having a sound investigative policy in place is an important step in minimizing potential damages claims, however, it is not enough to merely have good policies on paper. The entire workforce needs to know what the policies mean, and, if there is a breach, that management will react quickly and competently. The case of Boucher v Wal-Mart33 is instructive on this point: despite the fact that Wal-Mart is a large sophisticated
organization, it was still held liable for the misconduct of an employee. Wal-Mart had all the necessary policies in place: the Open Door Communication Policy, the Prevention of Violence in the Workplace Policy and the Harassment and Discrimination Policy. The employee testified that despite these policies, she was subject to harassment which led her to quit her job. As such, employers ought to be aware that failing to address bullying and harassment in the workplace could lead to a claim for constructive dismissal and may itself constitute conduct causing mental distress that can give rise to an award for significant damages.
- Marquardt v Strathcona County, 2014 AHRC 3.
- Supra note 22.
- Supra note 18.
- Supra note 13.
- Supra note 24.
- Supra note 9.
It is likely that the trend of courts and tribunals increasing damages awards will continue. Employers must take the potential for these awards into account while striving for best practices in the difficult circumstances of terminating an employee. The message that is being conveyed by the courts is that employers ought to ensure that employees are treated appropriately during the course of employment and at the time of termination. Otherwise, the employer could be on the hook for a large sum of money.