Damages for “Bad Faith Conduct in the Manner of Dismissal” in 2018
This article looks at wrongful dismissal cases in 2018 to see what Ontario Judges thought was bad employer behaviour (and what wasn’t) and how much it was worth.
Bad Faith Conduct
Typically, dismissed employees are not entitled to additional compensation for the disappointment, embarrassment, or other psychological effects of losing their job.
However, additional compensation is available if the employee proves “bad faith conduct in the manner of dismissal” which causes additional harm to the employee that was within the contemplation of the parties. These are also sometimes called “moral damages,” “aggravated damages,” or Honda and Wallace damages (after the leading case names).
Broadly, bad faith conduct in the manner of dismissal may arise if an employer is “untruthful, misleading, or unduly insensitive such as by attacking an employee’s reputation, misrepresenting the reasons for the dismissal or depriving the employee of an accruing right.”
In Ontario in 2018, there have been only five successful bad faith conduct claims reported and eight rejected claims reported. (By my count.) (There is no more official count.)
It is not enough to show that an employer was bad. The employee must also prove actual harm. As such, a claim can fail for two reasons. If the conduct was not bad, the claim will fail. If there is no harm, the claim will fail.
Conduct Not Bad
In one case, the court did not think a long-term employee’s dismissal was “unduly insensitive” when she was terminated after a proposed change in position to which she responded negatively. The employer had offered her a different role with substantially similar hours and remuneration. This was not bad faith conduct.
In another case, the court disagreed with the employee’s characterization of the manner of her termination. Even though the employer “made no attempt to be comforting or sensitive or even friendly,” the court ruled that this does not amount to bad faith conduct in the manner of dismissal.
Another employee’s claim failed because he did not prove that his employer dismissed him to avoid paying commissions. The court determined the employee wasn’t owed any commissions. As such, there was no evidence of bad faith conduct.
One employee suffered mental distress connected with the end of his employment, evidenced by hospitalization, mental health counselling, and strengthened medication. The court would have valued this harm at $10,000, but the court did not think that the employer’s conduct amounted to a constructive dismissal in the first place. As such, the bad faith conduct claim failed.
One employer became suspicious that an employee was involved in pin pad fraud and in the installation of spyware on a company computer. The employer did not prove that the employee was responsible for every aspect of this suspected wrongdoing (only the spyware). Nevertheless, the court found that the employer had reasonable and probable grounds to form its suspicions. There was no evidence the employer had acted in bad faith when terminating the employee for cause.
The court will also reject claims if there is no proven harm.
Two employee claims were tersely rejected because the employee simply proffered no evidence at trial of actual harm, one deputy judge saying little more than, “There was no evidence of exceptional harm done to the plaintiff, nor of any mental distress.”
In another case, even though the court observed that the employee was “visibly distressed” in her testimony, the court didn’t award bad faith conduct damages because they are “generally not available if the claimant has not sought medical attention, professional assistance or undergone some form of therapy for her mental distress.”
The rationale in this last case (Hampton) should be contrasted with Ruston and Johnston (both below) and 2017’s Galea v. Wal-Mart Canada Corp., 2017 ONSC 245 (CanLII), two cases where medical evidence was not required for bad faith conduct damages. They are in line with the Supreme Court of Canada’s 2017 decision in Saadati v. Moorhead,  1 SCR 543, 2017 SCC 28 (CanLII), where the court held that non-expert evidence could suffice to prove legally compensable mental injuries. This line of cases more accurately describes the current Ontario law on this point than does Hampton.
In one case, the court awarded $19,000 to an employee who was falsely accused of theft and fraud by his employer. The award was described as compensation for the additional difficulty the employee had in finding another job because of the reputational damage he suffered in a small industry. It was also described as compensation for the “devastating” emotional impact the employer’s conduct had on the employee’s peace of mind and on his family and for the betrayal the employee felt from his employer.
In another case, a son inherited a family business from his father. He shut the business down, terminating a long-standing employee who then sued for wrongful dismissal. The son responded by making accusations of impropriety and mismanagement against the dismissed employee. The court awarded $7,500 for the conduct of the employer in “blackening” the employee’s character “in his small community.”
In an undefended action, an employee alleged he had been “intentionally and maliciously harassed and publicly denigrated and humiliated by his supervisor and by several subordinates who were insubordinate.” Emotional distress documented by family doctor clinical notes and a prescription for sleeping pills was sufficient evidence to substantiate a $10,000 award.
The employer in another case also advanced false allegations of fraud in an attempt to dissuade the employee from bringing a wrongful dismissal law suit. The employer led absolutely no evidence to substantiate a $1.7M counterclaim alleging fraud. The court awarded $25,000 in bad faith conduct damages to compensate the employee for the emotional impact of the sham claim and for the reputational harm “that will follow him on his career path for the rest of his life.”
A municipality fired its “Chief Building Official” on the basis of its unsubstantiated allegations of concealing a conflict of interest. The conflict of interest was known to the municipality for years, and the employee did nothing to conceal it. It was “very unfair” for the municipality to “ambush” the employee with “some kind of interrogation” at the time of dismissal, having also already prepared a termination letter, misleading press release, and police escort out of the building. The court awarded $100,000 in bad faith conduct damages in light of the employee’s testimony regarding “weight loss, loss of appetite, irritability, sleeping problems, marital breakdown, and social isolation” suffered as a consequence of his “harsh dismissal.”
A Note About Punitive Damages
Whereas bad faith conduct damages are said to be “compensatory,” requiring proof of actual harm, punitive damages do not require such proof. An award of punitive damages is available to punish, deter, and denounce wrongful conduct.
Punitive damage awards must be “proportionate” to the wrong, a concept which takes into account other monetary awards and punishments imposed on a defendant for the same misconduct. As such, punitive damages and bad faith conduct damages are often assessed side-by-side, and the quantum of one can impact the amount awarded for the other:
In Johnston (above), $100,000 of bad faith damages was accompanied by $200,000 for punitive damages (described by the court as low).
In Ruston (above), $25,000 for bad faith damages came with $100,000 for punitive damages.
In Dang (above), $9,000 in bad faith damages was met with an additional $5,000 in punitive damages.
Even in Hampton (above), where nothing was awarded for bad faith conduct, the court awarded $25,000 for punitive damages and $25,000 for defamation damages. Part of the rationale for rejecting bad faith conduct damages was the risk of overlap with other monetary awards already granted.