An important feature of Wallace is that the notice period was extended not solely to compensate Wallace for emotional suffering. It was extended also due to the conclusion made by the trial judge that Wallace’s future employability was adversely impacted. This second aspect of the ratio has been long since forgotten since the advent of Honda. It remains alive and well as a valid plea.
Pre-Wallace
A 1984 B.C. Supreme Court, delivered by McLachlin, J., as she then was, dealt with a similar issue. 1 The plaintiff had been terminated for just cause, allegedly for theft. The Court noted that such unjustified allegation could lead to difficulties in finding alternate employment:
The employer, having decided to terminate the plaintiff, had two choices open to it. It could terminate her in the usual course, in a fashion which cast no moral cloud upon her character. Or it could terminate her for cause as it did, leaving her with a stigma which would make it much more difficult to find new employment. Having chosen the latter course, and having failed to substantiate the cause, the employer must be held responsible for the longer period of unemployment to which its unjustified conduct contributed.
The plaintiff was a relatively short term junior employee. She had been employed for 15 months as a teller. She was given 6 months as fair notice.
The Court also found these facts:
It is difficult to conceive of an accusation more calculated to cause humiliation and anguish to a dedicated bank employee than that of theft of the bank's funds. Moreover, the manner in which the plaintiff was dismissed was arbitrary and humiliating. Before her co-workers and family, at the beginning of what she hoped would be her career, she found herself branded as a thief. Not only were the circumstances of the plaintiff's termination of employment abrupt, harsh and humiliating, but that humiliation continued up to the time of trial. Before this trial there was never an investigation or proceeding in which she was given an opportunity to properly defend herself. The defendant pleaded in its defence that the plaintiff was dismissed from her employment for "just cause". This plea was maintained to trial, notwithstanding that it became apparent in the course of the trial that the defendant could not establish cause. An allegation that there is cause for termination of employment is a serious one and should not be made lightly. An allegation of theft is particularly grave.
The Court awarded damages of $5,000 for the tort of the intentional infliction of mental distress. The trial judge also found a claim in contract which would give rise to the same claim for emotional distress. This was 5 years before Vorvis and ironically accurately predicted the current state of the law:
it would appear that for damages for mental suffering to be awarded for breach of contract, it must be established:
(1) that the mental suffering was caused by a breach of contract; (2) that the breach was of a wanton or reckless character;
(3) that the breach must have been of such a character that mental suffering would have been in the reasonable contemplation of the parties when the contract was made, i.e., that it is not too remote; and
(4) that the mental distress must arise independently of pecuniary loss.
The same decision was reached in a B.C. Court of Appeal decision in 1997, prior to the release of the Wallace decision, written by Finch. J.A. 2 This was a post Vorvis decision. Finch, J.A. agreed with the trial judge that the false allegations of theft met the then test of "outrageous and reprehensible conduct" to give rise to an award of aggravated damages.
At trial, compensation was given for both the difficulty in finding new employment and mental distress in the sums of $50,000 and $25,000 respectively. Finch, J.A. found these two sums as properly compensable by way of aggravated damages. Again, this was a concurring decision, not that of the majority. 3
On a true analysis of the trial judge's reasons (see para.62) he awarded $50,000 for the increased difficulty the plaintiff had in finding new employment as a result of the defendant's false allegation of theft, and $25,000 for the mental distress the plaintiff suffered as a result of the defendant's "outrageous and reprehensible conduct". While the latter language might have been more appropriate to an award of punitive damages (see Vorvis), I am satisfied that both aspects of the additional award may properly be considered as awards of aggravated damages.
Post-Wallace
This secondary component of the Wallace ratio was also applied in a 2005 Ontario case. 4 Ferguson, J. found that the breach of the duty of good faith caused a further period of unemployment beyond the enhanced notice period:
By generating a substantially false investigation report which was circulated to senior staff and politicians in a small community and by the grossly exaggerated content of the letter of dismissal, the County created a stigma which prevented Mr. Downham from in finding alternate employment. The County must be responsible for this longer period of unemployment and not just the period of notice justified by the Bardal factors: Rahemtulla v. Vanfed Credit Union...
….. I conclude that the misconduct of the County prevented the plaintiff from finding alternative employment before October 2003. That means the damage caused to the plaintiff included a loss of salary for an additional 5 months beyond the 15 month notice period I have fixed. I note that I am not basing this on how long it took him to find another position. I am basing it on the fact that the misconduct of the employer prevented him from obtaining such a position for that length of time.
Post Honda
This second branch of Wallace was reviewed and applied in a 2019 decision from the Ontario court. 5 Allegations of theft had been made against the plaintiff which were found to be unsubstantiated. By the time of trial, seven years had passed within which the plaintiff had been unable to find a comparable position, notwithstanding his reasonable efforts. His requests for a letter of reference had gone unanswered. The events of his termination led to ‘tangible financial loss of income”. Without facing the allegations of dishonesty, the trial judge found that he would have had little issue finding a comparable position. The court stated, in awarding $50,000 for such incremental loss:
Wallace Damages for Loss of Income
[405] Given the guidance given by Iacabucci J. in Wallace that “if the manner of termination affects employment prospects” it may be worth of considerably more compensation” and given the direction of Bastarache J. in Keays that such damages are to be awarded, not by an arbitrary extension of the notice period but through an award that reflects the actual damages, this Court must attempt to assess the actual damages/tangible financial loss caused by the unfair manner of dismissal.
Honda
On the facts in Honda, Keays was medically disabled and unable to seek alternate employment. The second aspect of the Wallace decision involving tangible losses was not in issue.
This second branch of Wallace remains good law. If the unfair conduct interferes with the plaintiff’s ability to successfully seek alternate employment post-termination, it remains compensable. This issue was reviewed, as noted above in Downham, and applied to allow for an extension of the notice period to compensate for this claim, over and above the Wallace extension for emotional suffering. Headly awarded $15,000 in aggravated damages and an incremental $50,000 under this head of damages.
Honda is reviewed in more detail here.