The Wallace Bump and Moral Damages
In October of 1997, the Supreme Court of Canada decided, in a case known as Wallace vs. United Grain Growers, that the employer owed a “duty of fair dealing and good faith” to employees at the time of termination. This was actually fairly well established before this decision, but it was made clear cut at this time.
The Court also stated for the first time, that if there was a breach of that duty, the court should increase the usual notice period. In Wallace, the company made nasty cause allegations against the plaintiff, which it dropped on the eve of trial – this was the basis of the breach of the duty of good faith.
The Court in Wallace contemplated that such bad faith conduct could impact on a person emotionally and also negatively impact on his ability to find new employment. For many years after this decision, trial and appeal judges followed this decision and routinely allowed increased notice periods where the employer had acted unfairly to the employee.
Honda v. Keays, a further Supreme Court decision released in the summer of 2008 changed Wallace. Keays sued Honda alleging he was fired due to a medical issue. After termination, he was not medically able to work. The trial decision followed Wallace, found a breach of the duty of good faith and awarded an increased notice period.
The Supreme Court, however, determined that in this case, had such a breach been actionable (there were other issues involving whether an employee could sue civilly in Ontario for a human rights violation) that a court should not increase the notice period to compensate for emotional harm, but rather should award damages for emotional distress, where proven.
A good example of a recent decision made in October of 2010 awarding such damages described as “moral damages” is the decision of Mr. Justice Stinson in Zesta vs. Cloutier et al, referring to the counterclaim of Joe Durante, in which an incremental award of $75,000 was made for moral damages due to the employer’s repeated unfair and abusive treatment of Mr. Durante.
After the Keays v Honda decision, many observers believed that Wallace was hence outdated law, with respect to the remedy available for a breach of the duty of good faith.
It must be noted, however, that Keays did not assert a breach which impacted his ability to seek other employment. Keays was medically disabled and not looking for new employment. His original trial award for increased notice was strictly for emotional distress.
For this reason, it should be still possible to claim the Wallace “bump” for unfair conduct which adversely affects the employee’s ability to obtain new employment. This could include conduct such as unjustifiable cause allegations as were made in Wallace, the employer’s failure to provide a reference letter where there were no performance issues leading to termination and similarly connected conduct which can be shown to impact on further unemployment.
Human Rights Violations
The Keays v Honda decision determined that under Ontario law, all human rights complaints had to be filed under the Human Rights Code to the Human Rights Commission and could not be the subject of a civil claim. This decision was of academic significance only in Ontario as Ontario amended its legislation in the summer of 2008 to allow civil claims for a breach of a human rights violation when included with another civil claim. Hence in Ontario civil claims, a plaintiff suing for wrongful dismissal can also add a claim, where appropriate, for damages and other relief for a human rights violation at the time of termination.
For other provinces, the relevant legislation will need to be examined to determine if the human rights commission of the province has exclusive jurisdiction.
Under the new human rights legislation in Ontario, a civil court may make an order under section 46.1:
1. for damages for injury to dignity, feelings and self-respect; and/or
2. make an order for restitution other than through monetary compensation for losses arising out of the infringement.
Trial courts have yet to interpret these words in real cases to date. Traditionally such awards for injury to feelings have been modest, when given in a similar context. It is also arguable that restitution may mean reinstatement. Traditional common law judges rarely award reinstatement. It will remain for new judicial decisions to define these rights. It is expected that the awards for injured feelings will be non-taxable sums. Often plaintiff’s lawyers make these such claims, with the expectation of a favourable disposition on settlement to attempt to minimize the tax consequences.
The differing method of proof required to show a human rights violation as referenced in Shaw v Phibbs as noted in Section 12 of the Reinstatement Remedy section should be carefully noted.
Punitive Damages
Punitive damages are intended to punish a wrongdoer for deliberate malicious conduct. Such a damage award is rarely ordered in employment cases, particularly now with the development of moral damages as referenced in Keays and Honda above.
