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As a general rule, Canadian employees don’t get mental distress damages after a wrongful dismissal. Instead, most successful wrongful dismissal claimants get reasonable notice damages (a.k.a. pay in lieu of notice) and a portion of their legal expenses.

In cases where pay in lieu of notice doesn’t go far enough, recent cases remind us that employees can seek special damages in response to particularly egregious behaviour. This includes both behaviour in the course of an employee’s dismissal and in the litigation of a wrongful dismissal lawsuit.

AGGRAVATED DAMAGES AVAILABLE FOR MENTAL DISTRESS

In rare cases a dismissed employee may be awarded aggravated damages of their former employer engaged in unfair or “bad faith” conduct in the course of dismissal that caused the employee “mental distress”. This can include behaviour that is untruthful, misleading or unduly insensitive.

Employees won’t be entitled to damages for mental stress based on the usual stress and hurt feelings that arise from a dismissal. To obtain these damages, employees generally need to prove that they experienced mental distress linked to their employer’s bad conduct by supplying medical evidence, such as a psychiatrist’s opinion. Most recipients of these awards have been diagnosed with depression or anxiety after their dismissal or have shown that their pre-existing conditions were aggravated by the dismissal. But some employees have obtained these damages based on their own testimony about the impact of their employer’s behaviour, particularly when the behaviour was unusually poor.

In even rarer cases, a judge can order an employer to pay “punitive damages” to a fired employee. Punitive damages can be awarded for behaviour that is harsh, vindictive, reprehensible and malicious or extreme.

MENTAL DISTRESS DAMAGES CAN BE COSTLY

Recent cases remind us that while mental distress damages or punitive damages are uncommon in employment law, they can be very costly. Since these damages are meant to be both proportionate to the harm inflicted and to deter future bad conduct, bigger corporations may see even larger awards than small businesses.

Recent examples include:

  • Churchill v Aero Auction Sales Inc: an employee walked away with 12 months pay in lieu of notice, unpaid wages, as well as $75,000 in aggravated damages. Her employer falsely alleged that she quit to avoid paying her a severance package. The employee was during an acrimonious separation with her ex- spouse, the company’s president, and the Court believed that these family law issues (and not the employee’s work product) motivated the employer.
  • Boucher v Wal-Mart : an employee sued for constructive dismissal after her Wal-Mart ignored her harassment complaints. Wal-Mart was ordered to pay her $200,000 in aggravated damages and $100,000 in punitive damages. Her harasser was ordered to pay her $10,000 in punitive damages. In addition, she was paid 8 months pay in lieu of notice. The employee suffered poor physical and mental health arising from stress related to her treatment, for which she required medical intervention.
  • Galea v Wal-Mart: an employee was awarded 2 years pay in lieu of notice (including compensation for loss of her various workplace benefits and bonuses), $250,000 in moral damages, and $500,000 in punitive damages. Wal-Mart had misled the employee about her career prospects at the company throughout her last 10 months on the job, rather than simply dismissing her. In addition to these actions during her employment, the court citied the company’s delay tactics during the lawsuit as a basis for additional damages.
  • Doyle v Zochem: the Court of Appeal upheld an award ordering significant damages against an employer in a sexual harassment law suit. $60,000 in moral damages and $25,000 in human rights damages as well as 10 months salary. The employee’s physical and mental health was affected by her dismissal.
  • Altman v Steve’s Music Store: in this somewhat earlier case, an employer was ordered to pay 22 months pay in lieu of notice, $35,000 in damages for mental distress and $20,000 in punitive damages. The employee had been dismissed while sick with cancer after 30 years of service.  She suffered long-lasting mental distress after her dismissal.

LESSONS LEARNED

Employees are deserving of respect on the job and during their dismissals. Where employers mistakenly believe they can simply offer a severance package to fix their bad behaviour, they may end up owing significantly more- particularly if they persist in their bad conduct by delaying or aggressively litigating a wrongful dismissal lawsuit where it is not warranted.

RESOURCES

Honda Canada Inc. v. Keays2008 SCC 39 (CanLII)

Wallace v. United Grain Growers Ltd.1997 CanLII 332 (SCC)

Honda Canada Inc. v. Keays2008 SCC 39 (CanLII)

Churchill v. Aero Auction Sales Inc., 2019 ONSC 4766 CanLII

Boucher v. Wal-Mart Canada Corp.2014 ONCA 419 (CanLII)

Galea v. Wal-Mart Canada Corp., 2017 ONSC 245 CanLII

Altman v. Steve’s Music Store Inc.2011 ONSC 1480 (CanLII)

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