A dismissed employee who was wrongfully dismissed is entitled to pay in lieu of notice when their former employer fails to provide the employee with the appropriate notice at termination.

However, sometimes the dismissed employee may claim an additional loss resulting not from the actual dismissal but from the manner of the dismissal. These damages are called “moral damages.” They can also be called aggravated damages or bad faith damages. Both terms are essentially the same and are often used interchangeably in employment law.

What does it mean to be terminated from a job in “bad faith”?

In Ontario, employers owe their employees a duty of good faith and fair dealing upon termination. As such, to be terminated in bad faith means that the employer has acted poorly and contrary to this duty during the time that the employee was dismissed or terminated from their job. When that occurs, the employee may claim additional damages from the employer upon dismissal. For instance, moral damages may be appropriate when the employer engages in conduct that is untruthful, misleading or unduly insensitive at the time when the employee is being dismissed thereby breaching their duty of good faith and fair dealing.

In order to sustain a claim for moral damages, the employee must show that they endured mental distress because of the actions of the former employer. This mental distress should go beyond the normal upset feelings that employees can experience when they are being terminated. The employer’s bad faith conduct needs to have a distressing emotional impact on the employee beyond being upset simply because of the termination itself. Examples of mental distress can include anxiety and depression.

The legal history behind bad faith is long and involves numerous decisions. The Supreme Court of Canada decision of Honda v. Keays and the Ontario Court of Appeal decision of Galea v. Wal-Mart Canada Corp. are decisions typically cited by lawyers in order to set down general principles for moral damages. Interestingly, in the past courts would extend the notice period to compensate for moral damages. However, since the 2008 Supreme Court of Canada decision of Honda v. Keays, courts now award moral damages separately.

What are some examples of “bad faith”?

Below are some common examples of bad faith. Be aware that the bad faith conduct may occur during the termination or sometimes immediately after the termination. The entirety of the timeline of the matter and the nature of conduct will be reviewed by judges in order to assess if the totality of circumstances around the dismissal of the employee amounts to bad faith.

Some examples of bad faith conduct include:

• Terminating the employee as an act of retaliation because the employee made a complaint that he or she was experiencing workplace harassment.
• Making statements that are defamatory against the employee upon termination.
• Making false statements that the employee had participated in wrongdoing or misconduct upon dismissal in an effort to strongarm the employee into accepting termination or severance pay amounts that are less than what the employee is owed.
• Providing the employee with false or vague reasons for dismissal.
• Terminating the employee at a time when the employee had taken a statutorily protected leave of absence such maternity or sick leave.
• Terminating the employee in a humiliating fashion such as making the employee’s dismissal public or “walking out” the employee after the dismissal in front of other employees.
• Delaying or refusing to provide earned vacation pay, wages or benefits.
• Refusing to provide a reference letter in certain circumstances or providing a reference letter that contains false or misleading information.

What are some examples of conduct that would NOT amount to bad faith?

The employer is legally able to dismiss an employee with cause or without cause and provide reasons for doing so even if the reasons hurt the employee’s feelings.

Examples of behaviour on the part of an employer that would not amount to bad faith include:

• Disciplining the employee when appropriate and in a prompt manner if the employee engaged in misconduct or wrongdoing.
• Conducting a review of the employee’s work and being candid and honest about their lack of performance or issues around their job duties.
• Making statements about the employee in relation to their dismissal that are truthful and honest.
• Offering termination pay and severance pay upon dismissal that aligns with the employee’s employment agreement’s termination clause and entitlements under statute.

How can Zeilikman Law help?

Any employee who believes that they may have been terminated in bad faith should approach an employment lawyer to review their own specific case to ensure that their employment rights are protected. Failing to reach out to an employment lawyer may result in the employee failing to obtain their full legal entitlements to compensation for moral or aggravated damages. If our readers would like to delve more into this topic please review our blog “What are moral damages?”

Further, if employers have been accused of breaching their duty of good faith by the manner in which they dismissed an employee should also approach an employment lawyer. The employer can assist the employer in navigating these tough issues by providing ways in which the employer can minimize their litigation risk and what the next steps to take when confronted with a lawsuit.

Zeilikman Law can be contacted online here or via telephone at 905-417-2227 to schedule a confidential consultation.