Don’t add bad faith to wrongful dismissal

One of the most noticeable trends in recent years in wrongful dismissal litigation originates with the Supreme Court of Canada decision in Wallace v. United Grain Growers Ltd. Since this decision, it has been increasingly common for plaintiffs in wrongful dismissal actions to claim damage for an increased notice period due to bad faith termination.

Bad faith termination refers to the “manner” of dismissal. Injuries flowing from the “fact” of dismissal are not compensable. The obligation of good faith requires employers to be candid, honest, reasonable and forthright when dismissing employees. Employers must refrain from bad faith actions, such as being untruthful, misleading or unduly insensitive.

The duty of good faith is not an independent cause of action upon which terminated employees may bring a separate action against an employer. Instead, the breach of the duty of good faith is compensated by adding to the length of the reasonable notice period awarded for wrongful dismissal.

In Wallace, the plaintiff was a 59-year-old salesperson with 14 years’ service. The court awarded Wallace a 24-month notice period taking account of the fact that he had been terminated in a harsh and insensitive manner. He was abruptly fired, allegedly for cause, after receiving recent compliments on his work. Notwithstanding his commendable performance during his employment, the employer maintained the allegations of cause until trial.

The timing of a termination commonly leads to allegations of bad faith discharge. For example, bad faith is often alleged where the employer dismisses an employee who has recently received a discretionary raise, promotion or compliments on performance. Claims may also be brought after the employer dismisses an employee whose personal circumstances make the person particularly vulnerable, such as having recently returned from disability leave or having had a recent family crisis.

Bad faith may be found in making unfounded allegations of misconduct or just cause, or failing to follow procedural fairness in making the decision to terminate.

Allegations of bad faith may arise from the context of the termination meeting where the termination is held in a public place, or where the employee is escorted out of the building in an embarrassing fashion.

Where allegations of bad faith discharge are proven, employees may be compensated for such injuries as humiliation, embarrassment, mental pain or damage to their sense of self-worth, self-esteem, pride and self-confidence.

Bad faith conduct that impedes the employee’s ability to find alternative employment (such as conduct that triggers depression or damages the employee’s reputation) may result in the court awarding a longer notice period than conduct that does not affect the employee’s ability to find work.

Julie McAlpine is an associate with Filion Wakely Thorup Angeletti LLP. For more information contact (416) 408-3221, [email protected] or [email protected].

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