Damages for injured reputation well within scope of Wallace principle: Federal Court of Appeal
The Federal Court of Appeal has reinstated an adjudicator’s finding that a terminated employee was entitled to $250,000 in damages for injured reputation.
In October 2005, Douglas Tipple was hired by the Department of Public Works and Government Services Canada (PWGSC) as a special advisor to the deputy minister, tasked with performing a number of duties related to PWGSC’s Real Property Transformation Agenda. The position offered to Tipple was for a period of three years, but he was verbally advised the position could last as long as five years. Tipple accepted and relocated his family from Toronto to Ottawa.
Tipple appeared to be doing a good job, evidenced by a positive performance review he received from the deputy minister on June 26, 2007. Near the end of June 2007, Tipple and another advisor travelled to the United Kingdom to meet with officials who were engaged in a similar project there.
After the meetings, the deputy minister received information that Tipple and the other advisor missed key meetings during their trip. Without discussing the issue with Tipple, and without Tipple’s knowledge, the deputy minister issued letters of apology to the U.K. officials involved.
In August 2007, newspaper articles were published about the U.K. trip and the missed meetings. PWGSC launched an investigation into the U.K. trip, which found the advisors attended the meetings they were required to attend and Tipple only missed meetings that did not concern him. Tipple confirmed the report’s findings and expressed his disappointment upon finding out about the apology letters.
Since the report cleared Tipple of any wrongdoing, He wanted PWGSC to publicly correct the record, since he believed the newspaper articles were tarnishing his reputation. However, PWGSC decided against responding to the reports, and also advised Tipple not to speak with anyone.
Manufactured reason for termination and publicity
Following a meeting between the deputy minister and the minister, the deputy minister decided to terminate Tipple’s employment. Tipple was advised his services were no longer required, given he had delivered on his key commitments, there were no major initiatives left and PWGSC could not justify paying Tipple’s remaining salary. He was provided one month’s salary upon termination.
Tipple’s termination was reported in a subsequent newspaper article, which suggested the termination was a result of the U.K. trip. The article also referenced statements made in the House of Commons indicating the people involved in the U.K. trip were held accountable.
Tipple filed a grievance with PWGSC regarding his dismissal. Despite extensive efforts, he was unable to secure permanent employment after his termination. He was told by recruiters he was off limits until he was vindicated and that a search of his name brought up unflattering and damaging articles. Tipple testified that as a result of his termination he suffered “bouts of low self esteem, lack of confidence, stress, anxiety, feelings of betrayal, humiliation and hurt feelings.”
The board found Tipple was terminated to avoid a scandal and not for the department’s stated reasons. It determined Tipple was entitled to pay for the remainder of the term, but only awarded him the amount he claimed, less income he received from other jobs following his dismissal. The board also found PWGSC carried out Tipple’s termination in bad faith in trying to manufacture a reason for his termination and its failure to correct the record with the media and the House of Commons. The board awarded Tipple $125,000 for loss of dignity, hurt feelings and humiliation and $250,000 for the damage to his reputation.
PWGSC was successful in setting aside the damages awarded for psychological injury and loss of reputation. The Federal Court concluded the adjudicator erred by imposing a legal duty on PWGSC to protect Tipple’s reputation and then awarding damages based upon a breach of that duty. Tipple appealed this decision.
Damages for injured reputation reinstated
Citing the Supreme Court of Canada’s decision in Wallace v. United Grain Growers Ltd. in support for the availability of damages for injured reputation, the Federal Court of Appeal stated: “A bad faith termination of employment may, in certain circumstances, justify an award of damages in addition to the damages relating solely to the wrongful loss of employment. The relevant circumstances are present if the termination affects the employee’s ability to find new employment because unwarranted allegations made or condoned by the employer have unjustly harmed the employee’s reputation.”
The appeal court then formulated a three-part test to determine when damages to an employee’s reputation may be available:
•The employee’s reputation is damaged by public knowledge of false allegations relating to the termination.
•The employer fails to take reasonable corrective steps and offers no reasonable excuse for such failure.
•The damage to the employee’s reputation has impaired his ability to find new employment.
The Court of Appeal concluded the facts in this case met the test and reinstated the adjudicator’s $250,000 award.
Tips for employers
Even though most day-to-day terminations will not garner media attention, employers still need to be mindful of the impact their actions may have on a recently dismissed employee’s ability to find new employment.
Employers in smaller communities or specialized industries must take extra care not to misrepresent the reasons for an employee’s termination, since such conduct could negatively impact an employee’s ability to secure new employment and ultimately lead to a bad faith damages claim.
It is also important to point out that in a circumstance where inaccurate and negative information is circulating about a recently dismissed employee, even if the employer is not the source of such accusations, sometimes “no comment” will not be sufficient to prevent a finding of bad faith. See Tipple v. Canada (Deputy Head - Department of Public Works & Government Services), 2012 CarswellNat 1902 (F.C.A.).
