This is a review of the principles developed in the award of aggravated damages. Punitive damages awards are reviewed here.

The Supreme Court of Canada, in Honda v Keays, set the test for an award of aggravated damages as follows:  ¹

1. An employer has breached its duty of good faith and fair dealing in the manner in which the employee was dismissed;
2. Conduct that could qualify as an employer’s breach of good faith or the failure to deal fairly in the course of a dismissal includes an employer’s conduct that is untruthful, misleading or unduly insensitive, and a failure to be candid, reasonable, honest and forthright with the employee;
3. Where it was within the reasonable contemplation of the employer that the manner of dismissal would cause the employee mental distress;
4. The wrongful conduct of an employer must cause the employee mental distress beyond the understandable distress and hurt feelings that normally accompany a dismissal; and
5. The grounds for moral damages must be assessed on a case by case basis.

Quantum

It is clear that “normal distress and hurt feelings resulting from dismissal are not compensable. ² The assessment of the quantum of such a damage award is “an imprecise, fact-specific exercise”, one which is entitled to deference on appeal. ³

This being said, the assessment will also compare the facts in issue against precedent cases to assess the range of the damage award to be made: ⁴

While the quantum of damages awarded is necessarily fact-specific, this quantum is not dissimilar to amounts recently awarded to other employees mistreated in their manner of termination: Galea v. Wal-Mart Canada Corp., [2017] O.J. No. 6444, 2017 ONSC 245, 44 C.C.E.L. (4th) 251 (S.C.J.); Johnston v. Arran-Elderslie (Municipality), [2018] O.J. No. 6702, 2018 ONSC 7616 (S.C.J.); Strudwick v. Applied Consumer & Clinical Evaluations Inc., [2016] O.J. No. 3556, 2016 ONCA 520, 34 C.C.E.L. (4th) 235; some of which have been affirmed by this court: Boucher; Doyle.

The court will also review the harm caused by the wrongdoing, including embarrassment and humiliation and damage to the plaintiff’s reputation, and the impact upon the self-esteem of the plaintiff. The Court of Appeal affirmed the trial award of $50,000 of aggravated damages in a 2021 case in which no medical evidence was called at trial: ⁵

The motion judge was satisfied that Ms. Humphrey suffered compensable and reasonably foreseeable damages for mental distress. She set out her conclusions on the evidence at paras. 177 to 179, noting, among other things, that Ms. Humphrey had suffered embarrassment and humiliation from the public nature of the dismissal and that her reputation had been harmed by Mene’s allegations. Ms. Humphrey provided receipts for the psychotherapy she had received since February 2019. The motion judge accepted that what happened was devastating to Ms. Humphrey’s sense of self and would be with her for a long time. She noted that this was something that Mr. Sebag in particular would have been aware of. All of these findings were amply supported by the evidence, and constitute harm of the nature and extent that would justify an award of aggravated damages: see, e.g., Ruston v. Keddco MFG. (2011) Ltd., 2019 ONCA 125, 2019 C.L.L.C. 210-036, at paras. 12-14.

In an Alberta Court of Appeal case which reversed the award of aggravated damages at trial, this court reviewed the quality of the evidence to support this award. The plaintiff had been asked at trial: ⁶

How did the termination from Home Hardware affect you emotionally?

The plaintiff’s response narrated his emotional reactions. The Court of Appeal concluded that there was no evidence of the impact of the manner of termination upon the plaintiff and that this question related to the fact of termination. It is an incredible distinction, yet such was the decision.

Time of Termination

The Wallace decision defined the duty of good faith to be one arises at the time of termination. Initially, this was considered to be just that, the moment of termination, as was the case in a 2012 B.C. decision in which it was concluded that the investigation into the plaintiff’s activities was unfair, led to the termination, yet lacked sufficient connection to the time of termination to give rise to aggravated damages. ⁷ This decision is not consistent with modern authorities.

The Supreme Court in its 2020 decision ⁸ considered this issue. The plaintiff had asserted a four year period of alleged dishonesty leading to his dismissal. This Court defined the period of relevant review as “not confined to the exact moment of termination itself”.

The Ontario Court of Appeal came to the same conclusion in 2017, ⁹ holding that “pre and post termination conduct may be considered in an award for moral damages, so long as it is a ‘component of the manner of dismissal’”.

The same court also noted in a 2016 decision that the employer had failed to provide the Record of Employment on a timely basis which delayed the plaintiff’s employment insurance benefits and further, failed to remit the pay it owed her on termination, requiring government intervention. These factors were part of the matrix in assessing aggravated damages: ¹⁰

The abuse did not cease after termination. Government intervention was needed before Applied Consumer gave Ms. Strudwick the pay it owed her at the time of dismissal.  The company was tardy in sending the record of employment that delayed Ms. Strudwick’s entitlement to receive employment insurance.

The same conclusion was reached in a 2023 decision of the Nova Scotia Court of Appeal, ¹¹ in which the Court of Appeal allowed for a more expansive definition of the “time of termination”:

The conduct relied on by the trial judge in finding bad faith shows Elmsdale left Mr. Hiltz in limbo concerning his employment status for weeks. The facts found by the trial judge demonstrate a sequence of events leading to Mr. Hiltz’s departure from Elmsdale including:

1.               He was put off work on June 4 as a result of performance concerns, which were never justified at trial.

2.               Elmsdale offered him work as a sod layer on June 8, a position paying less money.

3.               When Mr. Hiltz questioned the fairness of the perceived demotion, he received an abusive call from the president of Elmsdale following which he was told the sod layer position was not available and the company truck was being taken back.

4.               Elmsdale issued a Record of Employment and sent Mr. Hiltz a letter “clarifying” his employment status, both of which said he was laid off due to lack of work even though the company was actively seeking new employees.

The court continued to note this more generous view of the "time of termination":

In my view, these clearly fall within the scope of the “manner of dismissal” and the trial judge was entitled to rely on them in finding Elmsdale liable for aggravated damages.

The B.C. Court of Appeal, in 2024, took the same expansive view of the time of termination: ^{12 13}

[35]      The “manner of dismissal” is an issue of fact, and in some cases may span a period of years before, or years after, the moment of dismissal. The rationale for this is aptly stated in Doyle at para 39:

… [W]hile some conduct during a dismissal meeting viewed in isolation would not constitute bad faith, the same conduct when part of a course of conduct on the part of an employer that inflicts mental distress on an employee may legitimately inform the result…

[36]      A court must not “parse too narrowly what is and is not a component of the manner of dismissal”: Doyle at para 39. This is particularly so on a motion to strike, where a court is bound to accept a plaintiff’s pleadings as fact and assess them generously.

[37]      In Matthews, the SCC upheld the trial judge’s assessment of a period of four years leading up to termination. In Lalonde, the court observed that the employer maintained wrongful accusations against the employee for almost five years (including a period of time post termination).

[38]      The Province argues that a court can only assess such pre-termination conduct in cases involving a claim for constructive dismissal. The authorities do not support this contention. There are grounds for arguing that the same principles would apply in a case of without cause termination. Doyle was one.

This is now firm law.

Supporting Evidence

The Supreme Court of Canada in 2017 concluded that medical evidence is not a prerequisite to showing emotional harm which has been suffered: ¹⁴

This Court has, however, never required claimants to show a recognizable psychiatric illness as a precondition to recovery for mental injury. Nor, in my view, would it be desirable for it to do so now. Just as recovery for physical injury is not, as a matter of law, conditioned upon a claimant adducing expert diagnostic evidence in support, recovery for mental injury does not require proof of a recognizable psychiatric illness. This and other mechanisms by which some courts have historically sought to control recovery for mental injury are, in my respectful view, premised upon dubious perceptions of psychiatry and of mental illness in general, which Canadian tort law should repudiate.

While it is true that medical evidence is not a prerequisite for the award, there still must be an evidentiary foundation to support the award. The B.C. Court of Appeal set aside the trial decision awarding aggravated damages, noting:

On the other hand, damages for mental distress beyond the ordinary upset that accompanied termination of employment cannot be evidenced simply from the demeanor of the plaintiff in the witness stand. There must be an evidentiary foundation for such an award (see Mustapha at para. 9). That evidentiary foundation may be testimony demonstrating a “serious and prolonged disruption that transcended ordinary emotional upset or distress” (Saadati at para. 40).

The Court of Appeal took exception to the manner on which the trial judge made the damage assessment:

Mr. Lau testified that since his termination, the one thing he has been focussed on is “for this case to have a result”. He wants to move on, but finds it difficult to move on with the record that he now has, and the accusations that have been made about him by RBC.

There is no medical evidence about Mr. Lau’s medical condition, or the impact that the termination has had on him. However, I could not help but gain the impression from the slow, quiet, and almost monotone manner in which he testified, that he is depressed.

In awarding aggravated damages on that basis, the judge said this:

I do not need medical evidence to prove that a false accusation of failing to tell the truth which is published can lead to mental distress.

The Court of Appeal also found that the trial judge based the award on her observation as to “the slow, quiet, and almost monotone manner in which [the plaintiff] testified”, some years after the event. This was not adequate testimony to support the claim.

The Saskatchewan Court of Appeal in its 2013 decision spoke to the question of the need for professional medical evidence to support the claim for aggravated damages. While such evidence would be “of considerable assistance” to the court, it is not mandated. This being said, a factual foundation is still required. ¹⁵

In a case in which no medical evidence had been called, the Ontario Court of Appeal upheld the trial award of $25,000 for aggravated damages, ¹⁶ as it did, as noted above in a second case, in which $50,000 was awarded. ¹⁷

Alleging Cause

There is no issue in the employer asserting just cause for termination where it has a genuine belief in its plea. It is perfectly acceptable to be wrong and avoid an aggravated damage claim. The issue becomes live when the employer fabricates a position to stymie the plaintiff’s claim or otherwise uses the litigation process in an abusive manner. A good example of this proposition can be found in a decision of the Ontario Court of Appeal: ¹⁸

In addressing the issue of aggravated damages, the motion judge considered the circumstances leading up to and surrounding Ms. Humphrey’s termination. She found that Mene did not act with good faith in alleging that it had cause for termination; rather, Ms. Humphrey’s termination was precipitated by, and sought to punish her for, her request for a salary increase. The motion judge further found that Mene had set Ms. Humphrey up to fail by hiring her with limited relevant background experience and failing to train her or to address performance issues directly (including the fact that she never received a performance review), and subjecting her to a toxic work environment.

The Ontario Court of Appeal in 2008 considered a case in which the employer had terminated the plaintiff while on sick leave. It also pled just cause for termination which it abandoned at the outset of trial. The Court found that the City had made a “mistake” in the termination decision. It also determined that the mere fact of resiling from the cause defence did not automatically lead to the conclusion of bad faith conduct: ¹⁹

The fact that in the present case the City abandoned the just cause defence at the outset of trial cannot be taken as evidence of bad faith or unfair dealing at the time of dismissal. There are numerous reasons why an employer might resile from the position that dismissal was for cause, including a willingness to compromise and to resolve disputes without the necessity of a trial. Employers must be free to abandon a position based on cause without fear that abandonment will automatically lead to liability for Wallace damages.

The court continued with the general proposition that the employer has the right to be wrong, given good faith in the decision making process. The fact this defence does not succeed is not presumptive of bad faith.

As to the issue of terminating an employee while on sick leave, this similarly was found to be lacking to lead to a bad faith conclusion:

However, the trial judge also found that the City made a "mistake" in dismissing Ms. Mulvihill while she was on sick leave. As explained above, the legal standard against which conduct is to be measured for the purposes of Wallace damages is not whether an employer made a mistake but, rather, whether the employer engaged in unfair or bad faith conduct. A mistake is not conduct that can be said to be unfair or bad faith. Thus, on the finding of the trial judge, dismissal while Ms. Mulvihill was on sick leave did not constitute a basis for the award of Wallace damages.

[66] Nor could it, in the circumstances. The mere fact that Ms. Mulvihill was on sick leave at the time of termination does not necessarily mean the dismissal was conducted in an unfair or bad faith manner. There must be other evidence of bad faith, unfair dealing or "playing hardball", such as cancellation of accommodation for an employee's illness as a reprisal for the employee having made a human rights claim: see Keays v. Honda Canada Inc., supra.

A similar finding was made in a 2007 decision of the same court in which it found that the employer defended the case, in good faith, although not succeeding in its plea. Accordingly there was no basis for an aggravated award on this particular plea: ²⁰

[4]               In particular, we see no bad faith on the part of the Bank in pursuing the allegations of dishonesty, albeit that in the end, those allegations were not proved.... As well, along those lines, the Bank cannot be faulted for not giving the respondent a letter of reference. We are also of the view that the Bank did not act improperly, in the circumstances of this case, in couriering the respondent’s belongings to her.

[5]               In our view, had the trial judge considered only the relevant factors, he would have awarded Wallace damages of four months.

Reviewing the Trial Award

For an appellate court to interfere with the damage award at trial, it must be shown that the trial judge made an error in a principle of law, or misunderstood the evidence, or erred in concluding that there was evidence on which a conclusion could be reached or failed to consider relevant factors or considered irrelevant ones, or made a "palbably incorrect” or “wholly erroneous” damage assessment. ²¹

Should a trial judge consider certain facts on this issue, which are not purely germane, this will not necessarily taint the overall result. This is a process which is not arithmetical as noted in Doyle v Zochem in which the Court of Appeal noted:

His assessment of moral damages is not diminished by the lesser irrelevant considerations he did take into account. The assessment of damages “… is not the equivalent of a mathematical equation in which an error in a sub-calculation produces an error in the outcome”: Pate Estate v. Galway-Cavendish and Harvey (Township), 2013 ONCA 669, 368 D.L.R. (4th) 193, at para. 82, per Lauwers J.A.in dissent but not with respect to this comment.

[42]      Zochem’s argument that the quantum of moral damages ought to be reduced on the basis that the trial judge took into account irrelevant considerations is dismissed.