Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701

On appeal from the court of appeal for Manitoba….

In 1972 a printing company wholly owned by the respondent decided to update its operations and seek a larger volume of commercial printing work.  The appellant, W, met L, the marketing manager of the company’s publishing and printing divisions, to discuss the possibility of employment.  W had the type of experience L sought, having worked approximately 25 years for a competitor that used a particular type of press.  W explained to L that as he was 45 years of age, if he were to leave his current employer he would require a guarantee of job security.  He also sought several assurances from L regarding fair treatment and remuneration.  He received such assurances and was told by L that if he performed as expected, he could continue to work for the company until retirement.  W was hired and enjoyed great success at the company; he was the top salesperson for each of the years he spent in its employ.  In 1986 he was summarily discharged without explanation.  W issued a statement of claim alleging wrongful dismissal.  In its statement of defence, the respondent alleged that W had been dismissed for cause.  This allegation was maintained until the trial commenced.  The termination of W’s employment and the allegations of cause created emotional difficulties for him and he was forced to seek psychiatric help.  His attempts to find similar employment were largely unsuccessful.  Prior to his dismissal, W made a voluntary assignment into personal bankruptcy, and remained an undischarged bankrupt when he commenced his action against the respondent.  The trial judge struck out his claim for damages for breach of contract, holding that a claim for damages for wrongful dismissal based on lack of notice vests in the trustee in bankruptcy, and concluded that the action in that regard was a nullity from the outset.  W’s attempt to appeal the trial judge’s ruling was stayed by the Court of Appeal pending completion of the trial.  The trial resumed and subject to the outcome of the appeal on the bankruptcy issue, W was awarded damages for wrongful dismissal based on a 24‑month notice period and  $15,000 in aggravated damages resulting from mental distress in both tort and contract.  The trial judge refused to award punitive damages.  The Court of Appeal reversed the trial judge’s findings with respect to W’s capacity to maintain an action for breach of contract, concluding that W had the right to continue his action for wrongful dismissal in his own name in the absence of the trustee.  It also allowed the respondent’s cross‑appeal.  It reduced the reasonable notice period to 15 months, on the basis that the trial judge may have allowed an element of aggravated damages to creep into his assessment and that recent awards in such cases had been getting too high, and overturned the award of aggravated damages.

Held (La Forest, L’Heureux‑Dubé and McLachlin JJ. dissenting in part on the appeal):  The appeal should be allowed in part and the cross‑appeal dismissed.

Per Lamer C.J. and Sopinka, Gonthier, Cory, Iacobucci and Major JJ.:  W can maintain an action for wrongful dismissal in his own name.  While under the Bankruptcy Act, an undischarged bankrupt has no capacity to deal with his or her property and no distinction is made with respect to whether that property was acquired before or after the assignment in bankruptcy, s. 68(1) carves out an exception to this general rule where the property in question can be characterized as “salary, wages or other remuneration”.  To remain true to the spirit of the Act, this exception must include an award of damages for wrongful dismissal.  The measure of such damages is the salary that the employee would have earned had the employee worked during the period of notice to which he or she was entitled.  The fact that this sum is awarded as damages at trial in no way alters the fundamental character of the money.  Several courts have interpreted the phrase “salary, wages or other remuneration” broadly.  The public policy considerations that inform the section offer further support for interpreting it broadly.

The trial judge’s award of damages in the amount of 24 months’ salary in lieu of notice should be restored.  In light of W’s advanced age, his 14‑year tenure as the company’s top salesman and his limited prospects for re‑employment, a lengthy period of notice is warranted.  Another factor to be considered is whether the dismissed employee was induced to leave previous secure employment.  Although the trial judge did not make specific reference to the inducement factor in his analysis of reasonable notice, in the circumstances of this case the inducements made, in particular the guarantee of job security, are factors which support his decision to award damages at the high end of the scale.

Bad faith conduct in the manner of dismissal is another factor that is properly compensated for by an addition to the notice period.  The contract of employment has many characteristics that set it apart from the ordinary commercial contract.  Individual employees on the whole lack both the bargaining power and the information necessary to achieve more favourable contract provisions than those offered by the employer, particularly with regard to tenure.  This power imbalance is not limited to the employment contract itself, but informs virtually all facets of the employment relationship.  The point at which the employment relationship ruptures is the time when the employee is most vulnerable and hence most in need of protection.  In recognition of this need, the law ought to encourage conduct that minimizes the damage and dislocation (both economic and personal) that result from dismissal.  To ensure that employees receive adequate protection, employers ought to be held to an obligation of good faith and fair dealing in the manner of dismissal, breach of which will be compensated for by adding to the length of the notice period.  While the obligation of good faith and fair dealing is incapable of precise definition, at a minimum 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.

While a dismissed employee is not entitled to compensation for injuries flowing from the fact of the dismissal itself, where an employee can establish that an employer engaged in bad faith conduct or unfair dealing in the course of dismissal, injuries such as humiliation, embarrassment and damage to one’s sense of self‑worth and self‑esteem might all be worthy of compensation depending upon the circumstances of the case.  Often the intangible injuries caused by bad faith conduct or unfair dealing on dismissal will lead to difficulties in finding alternative employment, a tangible loss which the Court of Appeal rightly recognized as warranting an addition to the notice period.  However, the intangible injuries are sufficient to merit compensation in and of themselves.  Bad faith conduct which affects employment prospects may be worthy of considerably more compensation than that which does not, but in both cases damage has resulted that should be compensable.  The trial judge documented several examples of bad faith conduct on the part of the respondent.  While the award of the equivalent of 24 months’ salary in lieu of notice is at the high end of the scale, it is not unreasonable when all the relevant factors are taken into account and there is accordingly no reason to interfere.

There is no reason to interfere with the conclusion of the courts below that there was insufficient evidence to support W’s claim that he had a fixed‑term contract for employment until retirement.

With respect to damages for mental distress, the Court of Appeal was correct in concluding that there was insufficient evidence to support a finding that the respondent’s actions constituted a separate actionable wrong either in tort or in contract.  In circumstances where the manner of dismissal has caused mental distress but falls short of an independent actionable wrong, however, the employee is not without recourse.  The trial judge has discretion in such circumstances to extend the period of reasonable notice to which an employee is entitled.

W is unable to sue in either tort or contract for “bad faith discharge”.  The Court should not imply into the employment contract a term that the employee would not be fired except for cause or legitimate business reasons.  The law has long recognized the mutual right of both employers and employees to terminate an employment contract at any time provided there are no express provisions to the contrary.  A requirement of “good faith” reasons for dismissal would be overly intrusive and inconsistent with established principles of employment law.  Similarly, the tort of breach of a good faith and fair dealing obligation with regard to dismissals has not yet been recognized by Canadian courts.  Such radical shifts in the law are better left to the legislatures.

The courts below were correct in finding that there is no foundation for an award of punitive damages.

Per La Forest, L’Heureux‑Dubé and McLachlin JJ. (dissenting in part on the appeal):  W’s action was not precluded by his bankruptcy.  Damages in lieu of reasonable notice constitute “salary, wages or other remuneration” for the purposes of bankruptcy legislation and hence are recoverable.  Moreover, damages for breach of the implied obligation of good faith are recoverable because of the personal nature of the cause of action.

To determine the period of reasonable notice in a wrongful dismissal action, the court examines the characteristics of the particular employment relationship relevant to the employee’s prospects of finding a similar position.  The manner of dismissal should only be considered where it impacts on the difficulty of finding replacement employment, and absent this connection, damages for the manner of termination must be based on some other cause of action.  The fact that some courts in the past have considered factors unrelated to prospects of re‑employment in determining the notice period has rendered the law uncertain and unpredictable.  To continue on this path would only increase that uncertainty and unpredictability.  The law affords other remedies for employer misconduct in the manner of dismissal not affecting prospects of re‑employment, and has now developed to the point that to these traditional actions may be added breach of an implied contractual term to act in good faith in dismissing an employee.  Recognition of an implied term in the employment contract of good faith in relation to the dismissal of employees is supported by previous decisions, academic commentary and related developments in other areas of contract law.  To the extent that recognition of such a term may be seen as a new development, it falls within the scope of the incremental step‑by‑step revision approved in Watkins and Salituro.

The trial judge fixed the period of reasonable notice at 24 months on the basis of a careful assessment of W’s prospects of re‑employment, and there is no reason to interfere in his assessment.  The trial judge’s award for the damages claimed by W for mental distress and loss of reputation should also be upheld.  These are general damages flowing directly from the employer’s breach of the implied term of good faith and fair dealing and are therefore compensable.

There is no reason to interfere with the trial judge’s conclusion that the respondent did not engage in sufficiently harsh, vindictive, reprehensible and malicious conduct to merit an award representing punitive damages.

……

The judgment of Lamer C.J. and Sopinka, Gonthier, Cory, Iacobucci and Major JJ. was delivered by

1                                   IACOBUCCI J.  —  This case involves both an appeal and a cross-appeal.  The appeal is largely concerned with issues of compensation in a wrongful dismissal action, specifically, the existence of a fixed-term contract, the right to damages for mental distress, whether or not one can sue for “bad faith discharge”, and the appropriate length of the period of reasonable notice. The cross-appeal raises an issue of bankruptcy law, namely, whether an undischarged bankrupt can maintain an action for wrongful dismissal in his or her own name.

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  1. Analysis

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  1. Damages for Mental Distress

73                              Relying upon the principles enunciated in Vorvis, supra, the Court of Appeal held that any award of damages beyond compensation for breach of contract for failure to give reasonable notice of termination “must be founded on a separately actionable course of conduct” (p. 184).  Although there has been criticism of Vorvis (see e.g. I. Christie et al., Employment Law in Canada (2nd ed. 1993), at pp. 749-50; R. B. Schai, “Aggravated Damages and the Employment Contract” (1991), 55 Sask. L. Rev. 345, at p. 355; J. Swan, “Extended Damages and Vorvis v. Insurance Corporation of British Columbia” (1990), 16 Can. Bus. L.J. 213) this is an accurate statement of the law.  The Court of Appeal also noted that this requirement necessarily negates the trial judge’s reliance on concepts of foreseeability and matters in the contemplation of the parties.  An employment contract is not one in which peace of mind is the very matter contracted for (see e.g. Jarvis v. Swans Tours Ltd., [1973] 1 Q.B. 233 (C.A.)) and so, absent an independently actionable wrong, the foreseeability of mental distress or the fact that the parties contemplated its occurrence is of no consequence, subject to what I say on employer conduct below.

74                              The Court of Appeal concluded that there was insufficient evidence to support a finding that the actions of UGG constituted a separate actionable wrong either in tort or in contract.  I agree with these findings and see no reason to disturb them.  I note, however, that in circumstances where the manner of dismissal has caused mental distress but falls short of an independent actionable wrong, the employee is not without recourse.  Rather, the trial judge has discretion in these circumstances to extend the period of reasonable notice to which an employee is entitled.  Thus, although recovery for mental distress might not be available under a separate head of damages, the possibility of recovery still remains.  I will be returning to this point in my discussion of reasonable notice below.

  1. Bad Faith Discharge

 75                              The appellant urged this Court to find that he could sue UGG either in contract or in tort for “bad faith discharge”.  With respect to the action in contract, he submitted that the Court should imply into the employment contract a term that the employee would not be fired except for cause or legitimate business reasons.  I cannot accede to this submission.  The law has long recognized the mutual right of both employers and employees to terminate an employment contract at any time provided there are no express provisions to the contrary.  In Farber v. Royal Trust Co., 1997 CanLII 387 (SCC), [1997] 1 S.C.R. 846, Gonthier J., speaking for the Court, summarized the general contractual principles applicable to contracts of employment as follows, at p. 858:

In the context of an indeterminate employment contract, one party can resiliate the contract unilaterally.  The resiliation is considered a dismissal if it originates with the employer and a resignation if it originates with the employee.  If an employer dismisses an employee without cause, the employer must give the employee reasonable notice that the contract is about to be terminated or compensation in lieu thereof.

76                              A requirement of “good faith” reasons for dismissal would, in effect, contravene these principles and deprive employers of the ability to determine the composition of their workforce.  In the context of the accepted theories on the employment relationship, such a law would, in my opinion, be overly intrusive and inconsistent with established principles of employment law, and more appropriately, should be left to legislative enactment rather than judicial pronouncement.

77                              I must also reject the appellant’s claim that he can sue in tort for breach of a good faith and fair dealing obligation with regard to dismissals.  The Court of Appeal noted the absence of persuasive authority on this point and concluded that such a tort has not yet been recognized by Canadian courts.  I agree with these findings.  To create such a tort in this case would therefore constitute a radical shift in the law, again a step better left to be taken by the legislatures.

78                              For these reasons I conclude that the appellant is unable to sue in either tort or contract for “bad faith discharge”.  However, I will be returning to the subject of good faith and fair dealing in my discussion of reasonable notice below.

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  1. Reasonable Notice

80                              The Court of Appeal upheld the trial judge’s findings of fact and agreed that in the circumstances of this case damages for failure to give notice ought to be at the high end of the scale.  However, the court found the trial judge’s award of 24 months’ salary in lieu of notice to be excessive and reflective of an element of aggravated damages having crept into his determination.  It overturned his award and substituted the equivalent of 15 months’ salary.  For the reasons which follow, I would restore the trial judge’s award of damages in the amount of 24 months’ salary in lieu of notice.

81                              In determining what constitutes reasonable notice of termination, the courts have generally applied the principles articulated by McRuer C.J.H.C. in Bardal v. Globe & Mail Ltd. (1960), 24 D.L.R. (2d) 140 (Ont. H.C.), at p. 145:

There can be no catalogue laid down as to what is reasonable notice in particular classes of cases.  The reasonableness of the notice must be decided with reference to each particular case, having regard to the character of the employment, the length of service of the servant, the age of the servant and the availability of similar employment, having regard to the experience, training and qualifications of the servant.

82                              This Court adopted the foregoing list of factors in Machtinger v. HOJ Industries Ltd., 1992 CanLII 102 (SCC), [1992] 1 S.C.R. 986, at p. 998.  Applying these factors in the instant case, I concur with the trial judge’s finding that in light of the appellant’s advanced age, his 14-year tenure as the company’s top salesman and his limited prospects for re-employment, a lengthy period of notice is warranted.  I note, however, that Bardal, supra, does not state, nor has it been interpreted to imply, that the factors it enumerated were exhaustive: see e.g. Gillespie v. Bulkley Valley Forest Industries Ltd., [1975] 1 W.W.R. 607 (B.C.C.A.); Corbin v. Standard Life Assurance Co. (1995), 1995 CanLII 3852 (NB CA), 15 C.C.E.L. (2d) 71 (N.B.C.A.); Bishop v. Carleton Co-operative Ltd. (1996), 1996 CanLII 4867 (NB CA), 21 C.C.E.L. (2d) 1 (N.B.C.A.).  Canadian courts have added several additional factors to the Bardal list.  The application of these factors to the assessment of a dismissed employee’s notice period will depend upon the particular circumstances of the case.

83                              One such factor that has often been considered is whether the dismissed employee had been induced to leave previous secure employment: see e.g. Jackson v. Makeup Lab Inc. (1989), 27 C.C.E.L. 317 (Ont. H.C.); Murphy v. Rolland Inc. (1991), 39 C.C.E.L. 86 (Ont. Ct. (Gen. Div.)); Craig v. Interland Window Mfg. Ltd. (1993), 1993 CanLII 1821 (BC SC), 47 C.C.E.L. 57 (B.C.S.C.).  According to one authority, many courts have sought to compensate the reliance and expectation interests of terminated employees by increasing the period of reasonable notice where the employer has induced the employee to “quit a secure, well-paying job . . . on the strength of promises of career advancement and greater responsibility, security and compensation with the new organization” (I. Christie et al., supra, at p. 623).

84                              Several cases have specifically examined the presence of a promise of job security: see e.g. Makhija v. Lakefield Research (1983), 14 C.C.E.L. 131 (Ont. H.C.), affirmed by the Ontario Court of Appeal (1986), 14 C.C.E.L. xxxi; Mutch v. Norman Wade Co. (1987), 1987 CanLII 2571 (BC SC), 17 B.C.L.R. (2d) 185 (S.C.).  In particular, I note that the British Columbia Court of Appeal recently adopted this approach in Robertson v. Weavexx Corp. (1997), 1997 CanLII 4097 (BC CA), 25 C.C.E.L. (2d) 264.  The facts of this case were very similar to those currently before this Court.  Writing for the court, Goldie J.A. stated at pp. 271-72:

Also part of the inducement to the respondent in making the move he did was, no doubt, the discussions as to long term employment. . . . As I have concluded, those discussions lacked contractual force in terms of the respondent’s assertion of a fixed term contract but nevertheless, they were and are, in my opinion, significant on the issue of reasonable notice.

85                              In my opinion, such inducements are properly included among the considerations which tend to lengthen the amount of notice required.  I concur with the comments of Christie et al., supra, and recognize that there is a need to safeguard the employee’s reliance and expectation interests in inducement situations.  I note, however, that not all inducements will carry equal weight when determining the appropriate period of notice.  The significance of the inducement in question will vary with the circumstances of the particular case and its effect, if any, on the notice period is a matter best left to the discretion of the trial judge.

86                              In the instant case, the trial judge found that UGG went to great lengths to relieve Wallace’s fears about jeopardizing his existing secure employment and to entice him into joining their company. At p. 172 the trial judge stated:

The [respondent] wanted a man with the skills of the [appellant] and to get him was prepared to accommodate his demands. . . . I have found that there was no fixed-term contract.  However, there was, in the assurance given to him, a guarantee of security, provided he gave the [respondent] no cause to dismiss him. [Emphasis added.]

87                              In addition to the promise that he could continue to work for the company until retirement, UGG also offered several assurances with respect to fair treatment.  Further, despite the fact that the company only had salary arrangements with their existing employees, they assured Wallace that they would implement a commission basis for him.  Although the trial judge did not make specific reference to the inducement factor in his analysis of reasonable notice, I believe that, in the circumstances of this case, these inducements, in particular the guarantee of job security, are factors which support his decision to award damages at the high end of the scale.

88                              The appellant urged this Court to recognize the ability of a dismissed employee to sue in contract or alternatively in tort for “bad faith discharge”. Although I have rejected both as avenues for recovery, by no means do I condone the behaviour of employers who subject employees to callous and insensitive treatment in their dismissal, showing no regard for their welfare.  Rather, I believe that such bad faith conduct in the manner of dismissal is another factor that is properly compensated for by an addition to the notice period.

89                              In Lojstrup v. British Columbia Buildings Corp. (1989), 1989 CanLII 2684 (BC CA), 34 B.C.L.R. (2d) 357, the British Columbia Court of Appeal found that Addis v. Gramophone Co., [1909] A.C. 488 (H.L.), Peso Silver Mines Ltd. (N.P.L.) v. Cropper, 1966 CanLII 75 (SCC), [1966] S.C.R. 673, Ansari v. British Columbia Hydro and Power Authority (1986), 1986 CanLII 1023 (BC SC), 2 B.C.L.R. (2d) 33 (S.C.), and Wadden v. Guaranty Trust Co. of Canada, 1987 CanLII 3309 (AB QB), [1987] 2 W.W.R. 739 (Alta. Q.B.), preclude extending the notice period to account for manner of dismissal.  Generally speaking, these cases have found that claims relating to the manner in which the discharge took place are not properly considered in an action for damages for breach of contract.  Rather, it is said, damages are limited to injuries that flow from the breach itself, which in the employment context is the failure to give reasonable notice.  The manner of dismissal was found not to affect these damages.

90                              Although these decisions are grounded in general principles of contract law, I believe, with respect, that they have all failed to take into account the unique characteristics of the particular type of contract with which they were concerned, namely, a contract of employment.  Similarly, there was not an appropriate recognition of the special relationship which these contracts govern.  In my view, both are relevant considerations.

91                              The contract of employment has many characteristics that set it apart from the ordinary commercial contract.  Some of the views on this subject that have already been approved of in previous decisions of this Court (see e.g. Machtinger, supra) bear repeating.  As K. Swinton noted in “Contract Law and the Employment Relationship: The Proper Forum for Reform”, in B. J. Reiter and J. Swan, eds., Studies in Contract Law (1980), 357, at p. 363:

. . . the terms of the employment contract rarely result from an exercise of free bargaining power in the way that the paradigm commercial exchange between two traders does.  Individual employees on the whole lack both the bargaining power and the information necessary to achieve more favourable contract provisions than those offered by the employer, particularly with regard to tenure.

92                              This power imbalance is not limited to the employment contract itself.  Rather, it informs virtually all facets of the employment relationship.  In Slaight Communications Inc. v. Davidson, 1989 CanLII 92 (SCC), [1989] 1 S.C.R. 1038, Dickson C.J., writing for the majority of the Court, had occasion to comment on the nature of this relationship.  At pp. 1051-52 he quoted with approval from P. Davies and M. Freedland, Kahn-Freund’s Labour and the Law (3rd ed. 1983), at p. 18:

[T]he relation between an employer and an isolated employee or worker is typically a relation between a bearer of power and one who is not a bearer of power.  In its inception it is an act of submission, in its operation it is a condition of subordination. . . .

93                              This unequal balance of power led the majority of the Court in Slaight Communications, supra, to describe employees as a vulnerable group in society: see p. 1051.  The vulnerability of employees is underscored by the level of importance which our society attaches to employment.  As Dickson C.J. noted in Reference Re Public Service Employee Relations Act (Alta.)1987 CanLII 88 (SCC), [1987] 1 S.C.R. 313, at p. 368:

Work is one of the most fundamental aspects in a person’s life, providing the individual with a means of financial support and, as importantly, a contributory role in society.  A person’s employment is an essential component of his or her sense of identity, self-worth and emotional well-being.

94                              Thus, for most people, work is one of the defining features of their lives.  Accordingly, any change in a person’s employment status is bound to have far-reaching repercussions.  In “Aggravated Damages and the Employment Contract”, supra, Schai noted at p. 346 that, “[w]hen this change is involuntary, the extent of our ‘personal dislocation’ is even greater.”

95                              The point at which the employment relationship ruptures is the time when the employee is most vulnerable and hence, most in need of protection.  In recognition of this need, the law ought to encourage conduct that minimizes the damage and dislocation (both economic and personal) that result from dismissal.  In Machtinger, supra, it was noted that the manner in which employment can be terminated is equally important to an individual’s identity as the work itself (at p. 1002).  By way of expanding upon this statement, I note that the loss of one’s job is always a traumatic event.  However, when termination is accompanied by acts of bad faith in the manner of discharge, the results can be especially devastating.  In my opinion, to ensure that employees receive adequate protection, employers ought to be held to an obligation of good faith and fair dealing in the manner of dismissal, the breach of which will be compensated for by adding to the length of the notice period.

96                              This approach finds support in the words of my colleague, Gonthier J., in Farber, supra.  Writing for a unanimous Court he stated at p. 859:

. . . for the employment contract to be resiliated, it is not necessary for the employer to have intended to force the employee to leave his or her employment or to have been acting in bad faith when making substantial changes to the contract’s essential terms.  However, if the employer was acting in bad faith, this would have an impact on the damages awarded to the employee.

97                              I find further support for this approach in the decisions of several cases wherein the manner of dismissal was among the factors considered in determining the notice period:  Eyers v. City Buick Cadillac Ltd. (1984), 6 C.C.E.L. 234 (Ont. H.C.), reversed in part (1986), 13 O.A.C. 66, with no comment regarding manner of dismissal;  Jivrag v. City of Calgary (1986), 1986 CanLII 1701 (AB QB), 13 C.C.E.L. 120 (Alta. Q.B.), reversed  in part (1987), 18 C.C.E.L. xxx (Alta. C.A.), with no comment regarding manner of dismissal; Hudson v. Giant Yellowknife Mines Ltd. (1992), 1992 CanLII 2810 (NWT SC), 44 C.C.E.L. 109 (N.W.T.S.C.); Hall v. Giant Yellowknife Mines Ltd. (1992), 1992 CanLII 2813 (NWT SC), 44 C.C.E.L. 101 (N.W.T.S.C.); Trask v. Terra Nova Motors Ltd. (1995), 1995 CanLII 9836 (NL CA), 9 C.C.E.L. (2d) 157 (Nfld. C.A.); MacDonald v. Royal Canadian Legion (1995), 1995 CanLII 4562 (NS SC), 12 C.C.E.L. (2d) 211 (N.S.S.C.);  Corbin, supra; Dunning v. Royal Bank (1996), 1996 CanLII 8159 (ON SC), 23 C.C.E.L. (2d) 71 (Ont. Ct. (Gen. Div.)); Deildal v. Tod Mountain Development Ltd. (1997), 91 B.C.A.C. 214.

98                              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.

99                              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.

100                           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.

101                           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.

102                           The Court of Appeal in the instant case recognized the relevance of manner of dismissal in the determination of the appropriate period of reasonable notice.  However, relying on Trask, supra, and Gillman v. Saan Stores Ltd. (1992), 1992 CanLII 6202 (AB QB), 45 C.C.E.L. 9 (Alta. Q.B.), the court found that this factor could only be considered “where it impacts on the future employment prospects of the dismissed employee” (p. 180).  With respect, I believe that this is an overly restrictive view.  In my opinion, the law must recognize a more expansive list of injuries which may flow from unfair treatment or bad faith in the manner of dismissal.

103                           It has long been accepted that a dismissed employee is not entitled to compensation for injuries flowing from the fact of the dismissal itself: see e.g. Addis, supra.  Thus, although the loss of a job is very often the cause of injured feelings and emotional upset, the law does not recognize these as compensable losses. However, where an employee can establish that an employer engaged in bad faith conduct or unfair dealing in the course of dismissal, injuries such as humiliation, embarrassment and damage to one’s sense of self-worth and self-esteem might all be worthy of compensation depending upon the circumstances of the case.  In these situations, compensation does not flow from the fact of dismissal itself, but rather from the manner in which the dismissal was effected by the employer.

104                           Often the intangible injuries caused by bad faith conduct or unfair dealing on dismissal will lead to difficulties in finding alternative employment, a tangible loss which the Court of Appeal rightly recognized as warranting an addition to the notice period.  It is likely that the more unfair or in bad faith the manner of dismissal is the more this will have an effect on the ability of the dismissed employee to find new employment.  However, in my view the intangible injuries are sufficient to merit compensation in and of themselves.  I recognize that bad faith conduct which affects employment prospects may be worthy of considerably more compensation than that which does not, but in both cases damage has resulted that should be compensable.

105                           The availability of compensation for these types of injuries has been recognized in other areas of the law.  In McCarey v. Associated Newspapers Ltd. (No.2), [1965] 2 Q.B. 86 (C.A.), Pearson L.J. examined the scope of recovery in an action for libel.  At pp. 104-5 he stated:

Compensatory damages, in a case in which they are at large, may include several different kinds of compensation to the injured plaintiff.  They may include not only actual pecuniary loss and anticipated pecuniary loss or any social disadvantages which result, or may be thought likely to result, from the wrong which has been done. They may also include the natural injury to his feelings — the natural grief and distress which he may have felt at having been spoken of in defamatory terms, and if there has been any kind of high-handed, oppressive, insulting or contumelious behaviour by the defendant which increases the mental pain and suffering caused by the defamation and may constitute injury to the plaintiff’s pride and self-confidence, those are proper elements to be taken into account in a case where the damages are at large.

106                           Pearson L.J.’s list of the elements properly compensated for in an award  of this type found favour with the Nova Scotia Supreme Court, Appeal Division in Barltrop v. Canadian Broadcasting Corp. (1978), 25 N.S.R. (2d) 637, at pp. 661-62,  leave to appeal refused, [1978] 1 S.C.R. vi.  Having been asked to assess damages in an action for defamation, MacKeigan C.J.N.S., writing for a unanimous court, quoted the above cited passage with approval (see also: Stumpf v. Globe Holdings Ltd. (1982), 1982 CanLII 1217 (AB QB), 22 Alta. L.R. (2d) 55 (Q.B.), at p. 61).

107                           In my view, there is no valid reason why the scope of compensable injuries in defamation situations should not be equally recognized in the context of wrongful dismissal from employment.  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.

108                           In the case before this Court, the trial judge documented several examples of bad faith conduct on the part of UGG.  He noted the abrupt manner in which Wallace was dismissed despite having received compliments on his work from his superiors only days before.  He found that UGG made a conscious decision to “play hardball” with Wallace and maintained unfounded allegations of cause until the day the trial began.  Further, as a result of UGG’s persistence in maintaining these allegations, “[w]ord got around, and it was rumoured in the trade that he had been involved in some wrongdoing” (p. 173).  Finally, he found that the dismissal and subsequent events were largely responsible for causing Wallace’s depression.   Having considered the Bardal list of factors, he stated at p. 170:

Taking [these] factors into account, and particularly the fact that the peremptory dismissal and the subsequent actions of the defendant made other employment in his field virtually unavailable, I conclude that an award at the top of the scale in such cases is warranted.

109                           I agree with the trial judge’s conclusion that the actions of UGG seriously diminished Wallace’s prospects of finding similar employment.  In light of this fact,  and the other circumstances of this case, I am not persuaded that the trial judge erred in awarding the equivalent of 24 months’ salary in lieu of notice.  It may be that such an award is at the high end of the scale; however, taking into account all of the relevant factors, this award is not unreasonable and accordingly, I can see no reason to interfere.  Therefore, for the reasons above, I would restore the order of the trial judge with respect to the appropriate period of reasonable notice and allow the appeal on this ground.

  1. Conclusions and Disposition

110                           I would dismiss the cross-appeal with costs and allow the appeal in part with costs here and in the courts below.  I would set aside the judgment of the Manitoba Court of Appeal and restore the trial judge’s award of 24 months’ salary in lieu of notice.  As explained above, the other aspects of the appellant’s claim are rejected.

…111                           MCLACHLIN J. (dissenting in part) — I have read the reasons of Justice Iacobucci.  While I agree with much of his reasons, my view of the law leads me to differ both in method and in result.

 

Excerpted from Source: Can Legal Information Institute: www.canlii.org