Epiq Systems, Inc.
Employment & Labour

Special damages in wrongful dismissal cases

By Doug MacLeod

Wrongful dismissal occurs when an employer does not provide an employee with adequate notice of termination.

Wrongful dismissal cases result in two main types of damages; these are:

(i) Damages for pay in lieu of reasonable notice (i.e. reasonable notice damages) (The test for establishing and assessing reasonable notice damages has been virtually the same since 1960); and,

(ii) Special damages, like Wallace damages, punitive damages, and damages for the intentional infliction of mental distress. (The test for establishing and assessing special damages has changed significantly since 1997.)

Special damages according to the Supreme Court of Canada (S.C.C.)

In 2008, the Supreme Court of Canada released its most recent major pronouncement on special damages. Many employment law practitioners believe the S.C.C. intended to severely restrict the circumstances in which special damages can be awarded in a wrongful dismissal case. In that case, the court, (i) overturned a $500,000 punitive damage award that had been reduced to $100,000 by the Ontario Court of Appeal; and (ii) overturned a Wallace damage award that was equal to nine months of the employee’s pay.

Special damages according to some trial judges & juries

Some trial judges and juries have had significantly different ideas about special damages.

In a 2010 decision, an Ontario trial judge noted… “if the employee can prove that the manner of dismissal caused mental distress that was in the contemplation of the parties, those damages will be awarded not through an arbitrary extension of the notice period, but through an award that reflects the actual damages” and awarded the employee $75,000 in “moral” damages.

In a 2012 decision, a jury ordered a B.C. employer to pay a former employee, among other things, $573,000 in punitive damages. I understand the employer appealed the punitive damages award and the parties settled before the appeal was held.

In another 2012 decision, a jury ordered Walmart to pay a former employee, among other things, $200,000 for intentional infliction of mental suffering, and $1,000,000 in punitive damages. I understand Walmart has appealed this jury award.

How to reduce this legal uncertainty

The apparent disconnect between the S.C.C.’s 2008 decision and the more recent trial and jury decisions has resulted in legal uncertainty. Employee counsel see a trend towards higher wrongful dismissal awards and employer counsel believe the appeal courts will overturn the recent special damage awards rendered by jury and trial judges.

As a result, until the appeal courts clarify the law in the area of special damages, we believe it will be more difficult to settle wrongful dismissal cases when special damages are claimed.

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