Types of Bad Faith Employer Conduct

The Supreme Court of Canada in Wallace v. United Grain Growers Ltd1 set out examples of bad faith employer conduct at the time of dismissal that will justify an award of moral damages. Justice Iacobucci wrote at paragraphs 98 to 101:

The obligation of good faith and fair dealing is incapable of precise definition. However, at a minimum, I believe that in the course of dismissal employers ought to be candid, reasonable, honest and forthright with their employees and should refrain from engaging in conduct that is unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive. In order to illustrate possible breaches of this obligation, I refer now to some examples of the conduct over which the courts expressed their disapproval in the cases cited above.

In Trask, supra, an employer maintained a wrongful accusation of involvement in a theft and communicated this accusation to other potential employers of the dismissed employee. Jivrag, supra, involved similar unfounded accusations of theft combined with a refusal to provide a letter of reference after the termination. In Dunning, supra, bad faith conduct was clearly present. Although the plaintiff’s position had been eliminated, he was told by several senior executives that another position would probably be found for him and that the new assignment would necessitate a transfer. However, at the same time that the plaintiff was being reassured about his future, a senior representative of the company was contemplating his termination. When a position could not be found, the decision was made to terminate the plaintiff. This decision was not communicated to the plaintiff for over a month despite the fact that his employers knew he was in the process of selling his home in anticipation of the transfer. News of his termination was communicated to the plaintiff abruptly following the sale of his home.

In Corbin, supra, the New Brunswick Court of Appeal expressed its displeasure over the conduct of an employer who made the decision to fire the employee when he was on disability leave, suffering from a major depression. The employee advised the manager as to when he would be returning to duty and informed him that he was taking a two-week vacation. He was fired immediately upon his return to work. The facts in MacDonald, supra, are also illustrative of bad faith conduct. In that case, the defendant employer closed its bar for three months and laid off the plaintiff bartender. While the bar was closed, the executive committee was replaced and the new officers decided to implement a different salary structure for bartenders when the bar reopened. The employer advertised for a bartender at a rate of almost half of the plaintiff’s hourly rate. The plaintiff was unaware of any change in his status, and it was only when he saw the advertisement in the newspaper that he learned that he had been dismissed and was not to be offered reinstatement.

These examples by no means exhaust the list of possible types of bad faith or unfair dealing in the manner of dismissal. However, all are indicative of the type of conduct that ought to merit compensation by way of an addition to the notice period. I note that, depending upon the circumstances of the individual case, not all acts of bad faith or unfair dealing will be equally injurious and thus, the amount by which the notice period is extended will vary. Furthermore, I do not intend to advocate anything akin to an automatic claim for damages under this heading in every case of dismissal. In each case, the trial judge must examine the nature of the bad faith conduct and its impact in the circumstances.

More recently in Honda Canada Inc. v Keays 2 Justice Bastarache added the following at para. 56:

Examples of conduct in dismissal resulting in compensable damages are attacking the employee’s reputation by declarations made at the time of dismissal, misrepresentation regarding the reason for the decision, or dismissal meant to deprive the employee of a pension benefit or other right, permanent status for instance.

These examples provided the Supreme Court of Canada are by no means exhaustive. Put most simply, courts disapprove of employers kicking an employee when he or she is down and will compensate the employee for the harm he or she has suffered. In Wallace, at para. 107, Justice Iacobucci explained the reasoning of the Court this way:

The law should be mindful of the acute vulnerability of terminated employees and ensure their protection by encouraging proper conduct and preventing all injurious losses which might flow from acts of bad faith or unfair dealing on dismissal, both tangible and intangible. I note that there may be those who would say that this approach imposes an onerous obligation on employers. I would respond simply by saying that I fail to see how it can be onerous to treat people fairly, reasonably, and decently at a time of trauma and despair. In my view, the reasonable person would expect such treatment. So should the law.

  1. Wallace v. United Grain Growers Ltd., 1997 CanLII 332 (SCC);
  2. Honda Canada Inc. v Keays, 2008 SCC 39;