Loss of Earning Capacity After Dismissal: Silva and More: A Review

An employer’s conduct may damage an employee’s career long after the notice period expires. But proof of that damage does not, by itself, identify the cause of action supporting recovery.

The Ontario Superior Court in Silva ¹ awarded $1,919,272 for loss of earning capacity, separately from notice, aggravated and punitive damages. The regulatory termination notice was found to have prevented the plaintiff from achieving comparable employment in her regulated career as a financial planner.

The question which arises is the legal foundation for this economic award. The reasons rely on Boucher and Ojanen, authorities whose foundations require careful distinction.

A Head of Damages Is Not a Cause of Action

Loss of earning capacity describes the economic interest impaired. It does not explain why the employer is legally responsible for the impairment.

Three questions must remain distinct:

1. What actionable obligation did the employer breach?
2. Did that breach impair the employee’s capacity or opportunity to earn income?
3. What financial consequences are recoverable under the applicable damages principles?

Evidence that employer conduct caused substantial financial harm cannot, by itself, establish the legal obligation making the employer responsible for that harm.

This distinction matters because insufficient notice, bad-faith conduct in the manner of dismissal and an independent tort may arise from overlapping facts. Their respective legal foundations should nevertheless be identified.

Boucher: The Tort Succeeded

In Boucher v. Wal-Mart Canada Corp., 2014 ONCA 419, the jury at trial found that the defendant supervisor Pinnock was liable for the tort of the intentional infliction of mental suffering. Wal-Mart was vicariously liable. The Court of Appeal upheld that finding and the $100,000 compensatory award.

Boucher also sought earnings to retirement “because of the wrongdoer’s tortious conduct”

The tort supplied an actionable foundation, but Boucher still had to prove the continuing claim of lost income.

She had recovered from the illness caused by Pinnock’s conduct within two months and was well enough to work. Her subsequent inability to find comparable employment did not establish continuing impairment caused by the tort.

The Court also ² also rejected a contractual guarantee of employment to retirement. Thus, the tort succeeded, but the additional economic claim failed.

The Transition in Silva

Paragraph 377 of Silva invokes Boucher’s tort-based proposition and then states:

“This speaks to the principle of putting the plaintiff in the position she would have occupied had she not been wrongfully dismissed.”

That transition requires explanation. Wrongful dismissal is contractual.

The reasons ³ identify the regulatory filing as the employment obstacle and invoke Ojanen. Yet defamation was rejected at paragraphs ⁴. In fact, there was no Paragraphs 438–441 contain no express successful tort finding. ⁵

The Court rejected bad faith in submitting the notices. The reasons instead placed the consequences of the erroneous conclusions under earning-capacity and punitive damages. That identifies remedies without clearly articulating the actionable foundation for the economic award.

Wallace Rejected the Proposed Tort but Recognized Economic Harm

In Wallace v. United Grain Growers Ltd., [1997] 3 SCR 701, the Supreme Court majority expressly rejected the proposed tort of bad-faith dismissal at paragraphs 77–78, as was submitted. It, nevertheless, paragraph 104 recognized that unfair dismissal conduct could cause:

“difficulties in finding alternative employment, a tangible loss”

Paragraphs 108–109 applied that reasoning to Wallace’s diminished employment prospects and restored the 24-month notice award. McLachlin J.’s partial dissent proposed an implied contractual duty of good faith rather than adopting the proposed tort.

The coexistence of these conclusions is significant. Rejection of a general tort did not mean that employer-caused damage to future employability could never attract compensation.

Honda Did Not Address the Second Branch of Wallace

Honda Canada Inc. v. Keays, 2008 SCC 39, principally addressed mental distress caused by bad-faith conduct in dismissal. Paragraph 59 stated:

“Damages attributable to conduct in the manner of dismissal are always to be awarded under the Hadley principle.”

The Court rejected arbitrary notice extensions in favour of compensation reflecting actual loss.

However, Honda did not address what is cited as the second branch of Wallace: tangible financial loss caused by employer conduct impairing prospects of obtaining replacement employment. In Honda, the plaintiff was medically disabled at the time of termination and unable to work. This secondary Wallace claim was not made.

Honda should not be read as rejecting an economic-loss category it did not examine. Equally, it should not be presented as expressly deciding the scope of recovery under that branch.

The argument is that the economic-loss principle survives, with compensation assessed by reference to the financial consequences established.

Downham: Further Unemployment Caused by Employer Conduct

In Downham v. Lennox and Addington (County), 2005 CanLII 45197 (ON SC), Ferguson J. found that a substantially false investigation report and exaggerated dismissal allegations created a stigma preventing replacement employment.

The Court awarded an additional five months’ salary beyond the 15-month notice period. It distinguished the time the employee happened to remain unemployed from the period during which the employer’s misconduct prevented employment.

Although predating Honda, Downham illustrates the particular economic injury involved.

Headley: Express Recognition After Honda

Headley v. City of Toronto, 2019 ONSC 4496, provides direct post-Honda trial-level support.

The Court noted ⁶ connected unsubstantiated allegations of theft, fraud and dishonesty, together with difficulties obtaining a reference, to the inability to obtain comparable employment. Despite reasonable efforts, Headley remained in substantially lower-paid work.

Paragraph 405 combined Wallace’s recognition of impaired employment prospects with Honda’s actual-loss approach. At paragraph 407, the Court awarded:

“$50,000 for tangible financial loss caused by the unfair manner of his dismissal.”

This was separate from $15,000 for mental distress, and the Court addressed duplication with notice damages.

Wilsher: Recognition of the Harm, but a Different Remedy

Wilsher v. Olympic Wholesale, 2026 ONSC 3620, offers a more recent illustration.

The Court awarded 19 months’ ordinary notice and added 14 months for bad faith and unfair dealing, producing 33 months in total.

The remedial form requires caution. Extending notice raises a different question from separately assessing the financial consequences of impaired employability. Headley provides the clearer example of the latter approach.

The history and remedial distinction are examined further in Wallace Part 2: Damages for Tangible Financial Loss.

Ojanen Offers Another Contractual Route

Ojanen v. Acumen Law Corporation, 2021 BCCA 189, also qualifies any criticism based solely on the absence of a tort.

Paragraph 57 directs attention to:

“what was in the reasonable contemplation of the parties when they entered into the contract”

The Court of Appeal ⁷ addresses contractual compensation for the lost opportunity to become a lawyer at the end of the articling period. The decision awarded $100,000 for loss of earning capacity.

The contractual setting matters. An articling agreement has an identifiable professional-qualification purpose. Extending its reasoning to an established employee requires examining the obligations and expectations arising from that employee’s own relationship.

Similarity in career damage supports an analogy. It does not replace the contractual analysis.

A Possible Foundation Must Not Be Attributed to the Judgment

The second branch of Wallace may offer an alternative explanation for the economic award in Silva. It is not the analysis expressly adopted in the earning-capacity discussion.

That distinction should remain clear. Commentary may identify a legal foundation capable of supporting a result while observing that the judgment did not develop it.

Nor does the existence of a possible foundation automatically establish its application. It remains necessary to identify the relevant breach, reconcile the findings concerning the regulatory reporting, and connect the actionable conduct to the financial loss.

The Correct Comparison Matters

Compensation for insufficient notice ordinarily assumes lawful termination with the required notice or payment. It does not assume indefinite continuation of the former job.

For additional economic loss, the inquiry should isolate what probably would have happened had the employer complied with its obligations in conducting the dismissal.

In a regulatory-reporting case, that includes considering the consequences of compliant reporting following a lawful termination. This separates losses inherent in losing employment from additional losses caused by actionable conduct.

The assessment must also avoid compensating the same earnings loss through both notice damages and the additional award.

Employability and Medical Incapacity

An employee may retain the skills and health necessary to work while being excluded from the market for those skills.

Regulatory or reputational obstruction therefore differs from continuing psychological incapacity. That distinction may explain why the result in Boucher does not govern every subsequent earning-capacity claim.

But it identifies the mechanism of loss. It does not dispense with the need to establish liability.

The Question Silva Leaves Open

The absence of a successful tort is not necessarily fatal. Ojanen provides a contractual approach. The second branch of Wallace, subsequently applied in Headley, offers another possible foundation.

These possibilities should inform the analysis without being injected into the judgment.

The criticism is consequently precise: Silva demonstrates the employment obstacle more clearly than it articulates the actionable obligation supporting compensation for its consequences.

A substantial financial loss may be recoverable. The reasons should explain which breach makes it so.

1. Silva v. Royal Bank of Canada, 2026 ONSC 3841,
2. Paragraphs 106–107
3. Paragraphs 379–381
4. Paragraphs 436-437
5. Paragraphs 438-441
6. Paragraphs 402–404
7. Paragraphs 62–63