January 30, 2015
In December 2014, the NL Supreme Court ordered an employer to pay its former employee $30,000 in moral damages to compensate him for the mental distress its conduct caused him when it terminated his employment – the first such award in NL, and one of the highest in Canada.
It’s been 7 years since the Supreme Court of Canada last visited compensation for employers’ conduct in the manner of employee dismissal, and “moral damages” replaced the “Wallace damages” that first appeared 11 years earlier. Where does compensation for the employer’s conduct in dismissing an employee stand now? Here are 7 lessons employers can learn from the last 7 years.
FROM “WALLACE DAMAGES” TO “MORAL DAMAGES”
Until 1997, when a dismissed employee sued her former employer for “wrongful dismissal” (breach of the employment contract) she could only be compensated for her employer’s failure to give her reasonable notice of the employment termination – but not for actually losing her job or any resulting distress she might have suffered.
Wallace Damages. That all changed in 1997 and the Supreme Court of Canada’s decision in Wallace v. United Grain Growers Ltd. The Court decided that an employer owes its employees a duty of good faith and fair dealing in the manner of dismissal – and if the employer’s breach of that duty caused the employee mental distress, she could be compensated for that by extending (or “bumping up”) the reasonable notice period. This became commonly known as “Wallace damages” and the “Wallace bump-up”. The employee might also be entitled to additional compensation (aggravated damages). Employers immediately noticed – and so did employees. Almost every wrongful dismissal lawsuit included a claim for Wallace damages, often with no basis. Courts extended notice periods, but it was tough to identify a consistent pattern and thus the employer’s exposure.
“Moral” Damages. Seven years ago, the Supreme Court of Canada revisited – and revised – the issue in Honda Canada Inc. v. Keays: it replaced “Wallace damages” with “moral damages”, did away with the “Wallace bump-up” as the way to calculate compensation, and merged “Wallace damages” and “aggravated damages” to a single form of compensation. Now, an employee will be compensated if she can prove the employer’s manner of dismissal caused her mental distress that both she and the employer could reasonably foresee – for example, where the employer is untruthful, misleading or unduly insensitive. And the amount of compensation is the actual loss the employee suffered.
December 2014. On December 16, 2014, the NL Supreme Court awarded a former employee $30,000 in “moral damages”, one of the highest awards in Canada in the last 7 years. The employer dismissed Turner, a 22 year employee, seven months after he participated in organizing a job action due to excessive workload. Turner sued for wrongful dismissal and punitive damages for bad faith and maliciousness. The Court decided his employer breached its duty to act with good faith and fairness in the manner of his dismissal, and it impacted and exacerbated Turner’s mental health beyond any normal distress or hurt feelings as a result of the dismissal itself, and he and his employer did or should have contemplated this. The decision was based on the employer’s failure to conduct an objective and full assessment of Turner’s work, its failure to give him a meaningful opportunity to respond to alleged concerns or to address deficiencies, the tone and content of the dismissal letter, the failure to pay him vacation time, and the complaint it filed with Turner’s professional governing body that made exaggerated reference to Turner’s incompetence, negligence and misleading clients and involved the employer’s management employees – and also interfered with Turner’s future job prospects. Read the NL Supreme Court’s decision in Turner v. Newfoundland and Labrador Legal Aid Commission, 2014 NLTD(G) 156 (SCTD).
7 LESSONS IN 7 YEARS
So where does compensation for the employer’s conduct in dismissing an employee stand now? Here are 7 lessons employers can learn from the 7 years since the Supreme Court of Canada’s Honda decision:
Please contact your McInnes Cooper lawyer or any member of our McInnes Cooper Labour & Employment Team to discuss this topic or any other legal issue.
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