N.S. Court of Appeal rejects jury’s 48-month <i>Wallace</i> award

Courts generally like to defer to juries when it comes to things such as findings of fact and what punishment suits the crime. But sometimes jury decisions can come back, well, a little wonky. That was the case in a ruling out of Nova Scotia where a jury awarded a woman, let go without cause, four months in reasonable notice and a 48-month <i>Wallace</i> extension for bad faith on the employer’s part.

The Nova Scotia Court of Appeal said the amount far exceeded what had been awarded and the facts of the case simply didn’t justify it. So it substituted a nine-month Wallace extension.

The Court of Appeal also weighed in on the debate of whether or not Wallace damages should be subject to mitigation. Its opinion? No. If a former employer, who acted in bad faith, could deduct wages earned by the worker at her new employer, then the employee wouldn’t be fairly compensated for the bad-faith conduct, the court said.

Mammoth Wallace ruling overturned

The Nova Scotia Court of Appeal has overturned a jury decision that awarded an eye-popping 48 months in Wallace damages.

The Court of Appeal reduced the damages awarded to Wendy Jessen in Jessen v. CHC Helicopters International Inc. to nine months — still a relatively high award for Wallace damages. And, in one of the more interesting aspects of the decision, Nova Scotia’s top court weighed in on whether or not Wallace damages should be subject to mitigation. Its answer? No, they should not.

In coming to that decision, the Nova Scotia Court of Appeal took a look at the Ontario Court of Appeal’s 2002 decision in Prinzo v. Baycrest Centre for Geriatric Care. In that case, Ontario’s top court noted that the issue of mitigation of damages did not arise in the original Wallace decision.

“Ordinary damages for wrongful dismissal are subject to a duty to mitigate on the part of the employee,” the Ontario Court of Appeal said in Prinzo. “The amounts earned in mitigation are deducted from the amount of damages awarded to an employee in lieu of notice.”

But the Ontario court pointed out that if the salary Prinzo earned at her new employer was deducted from the damages in relation to the Wallace extension, “Prinzo would not effectively be compensated for the injury done to her.”

The Nova Scotia Court of Appeal said the breach of obligation of good faith and fair dealing in the matter of dismissal is to be compensated by adding to the length of the notice period.

“Consequently, an argument can be made that the negotiation ought to apply to the Wallace damages just as it does to the reasonable notice period,” the Court of Appeal said. “However, for the reasons set out in Prinzo, I am of the view that reducing an award of Wallace damages by the amount of earned income does not accord with the Supreme Court of Canada’s view in Wallace that an employee should be compensated for bad-faith conduct.”

Thomas Groves, an associate specializing in labour and employment law at Cox Hanson O’Reilly Matheson in Halifax, represented CHC Helicopters at the Nova Scotia Court of Appeal. He said he wasn’t sure why the court settled on nine months.

“The court really didn’t explain the rationale it used for determining nine months and why that was the appropriate number,” said Groves.

No cap on Wallace damages, but …

The jury awarded Jessen 48 months’ in Wallace damages which, at her salary, amounted to $170,880. In reviewing the decision, the Nova Scotia Court of Appeal pointed out that there is no cap on Wallace damages.

“However, the Supreme Court of Canada in Wallace stated … that a global notice award (both reasonable notice and Wallace damages) of 24 months’ salary in lieu of notice is at the ‘high end of the scale,’” the Court of Appeal said.

In his address to the jury, the trial judge pointed out two matters: CHC Helicopters’ delay in providing a record of employment and its failure or refusal to provide a letter of reference.

But the Court of Appeal pointed out that these two forms of bad-faith conducts of themselves are not particularly egregious. In Schmidt v. AMEC Earth & Environmental Ltd., the employer failed to provide a requested and promised letter of reference. The employee was awarded one month for Wallace damages.

“Usually the lack of a reference letter or a delayed record of employment is found in combination with other factors supporting a claim for Wallace damages,” the Court of Appeal said. “Even then, the periods of notice have not approached the award of 48 months that was made here.”

Other cases

The Court of Appeal listed a few cases with similar facts to Jessen and the amount of Wallace damages awarded:

•In Schimp v. RCR Catering Ltd., [2004] N.S.J. No. 57 (C.A.), the employer made unsubstantiated accusations of theft, removed the plaintiff from the premises in view of other employees, and banned him from the premises for six months. No letter of recommendation was provided. Wallace damages: three-and-a-half months.

•In McCulloch v. IPlatform Inc., [2004] O.J. No. 5237 (S.C.J.), the employer maintained just cause allegations throughout the trial, and failed to provide insurance claims forms and a letter of reference. It tried to hide the true identity of the company and claimed the employer no longer existed. Wallace damages: three months.

•In Chabot v. William Roper Hull Child and Family Services, [2003] A.J. No. 82 (Q.B.), the plaintiff was misled about the purpose of the meeting in which she was dismissed, and by a personnel manual that suggested there would be no dismissal without warning. The employer refused to pay reasonable notice unless she signed a release, and did not provide a reference letter. Wallace damages: three months.

•In Marshall v. Watson Wyatt & Co. (2002), 57 O.R. (3d) 813 (C.A.), management told the employee that her dismissal was the result of restructuring, but then pleaded cause in its statement of defence. It maintained allegations of insubordination, inability to work with subordinates or be a team player, and general unprofessionalism for two years until just before trial. The employer refused to pay commissions owed to her and delayed sending her record of employment. Wallace damages: three months.

No ‘public humiliation’ in Jessen

Jessen argued that the jury’s award for Wallace damages was not founded just on the delayed record of employment and lack of a reference letter noted by the trial judge in his charge to the jury.

She argued there was evidence of unfounded allegations, insensitivity as to her personal circumstances, her being misled as to the reasons for her termination, active intent to hurt her, failure to hear her out, no warning, not paying amounts due for vacation pay and broken promises.

Jessen also referred to her diagnosis with an adjustment reaction disorder and the stigma attached to her dismissal.

But the Court of Appeal said the arguments raised by Jessen did not establish that the manner of her dismissal was “exceptionally egregious.”

“There was no public humiliation, such as an accusation of theft or fraud or being escorted out of the premises,” the Court of Appeal said.

A ‘very significant disparity’

Even if there had been exceptionally egregious conduct on the employer’s part, there was a very significant disparity between the jury award and other cases involving Wallace damages, the Court of Appeal said.

Jessen was only with CHC Helicopters for two-and-a-half years. The jury determined an appropriate award for reasonable notice was four months and added an award of 48 months, equivalent to four years, as the extended period of notice.

“Forty-eight months is the highest award of Wallace damages to be found in existing case law,” the Court of Appeal said. “Nothing in the jurisprudence approaches its magnitude. The facts of this case are not in any way extreme. In my view, they are certainly not extreme enough to justify the massive discrepancy between the amount of the jury award and the awards of Wallace damages in other decided cases.”

While the court said a jury is entitled to “very considerable deference” on both findings of fact and assessment of damages, the 48 month Wallace award simply could not be justified. It lowered the damages to nine months.

For more information see:

Jessen v. CHC Helicopters International Inc., 2006 CarswellNS 296, 2006 NSCA 81 (N.S. C.A.)

Schmidt v. AMEC Earth & Environmental Ltd., [2004] B.C.J. No. 1571 (S.C.)

What’s a Wallace average? Survey says about 3.4 months

In its ruling in Jessen, the Nova Scotia Court of Appeal discussed an article written by Gavin Hume and David Wong entitled “Wallace Damages: What Constitutes Bad Faith?” from the Annual CBA National Administrative Law and Labour/Employment CLE conference held in Ottawa in November 2005.

That article summarized 99 cases from across Canada up to June 2005 in which Wallace damages were awarded. Some of the decisions did not differentiate between the reasonable notice period and Wallace damages. Of the 73 cases in which an amount was explicitly awarded as Wallace damages, the average extension to the reasonable notice period was 3.4 months. None of the cases exceeded 12 months’ Wallace damages.

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