Damages for Wrongful Dismissal (An Employer’s Guide)

Employment and Labour

Notice of Termination

An action for wrongful dismissal is based on an implied obligation in all employment contracts to give reasonable notice of an intention to terminate the employment. The notice allows an employee the time to find replacement employment before they lose their income from their current employment.

If the employer does not have “just cause” for termination, then the employee is entitled to notice of termination or payment in lieu. Just cause is usually reserved for the most egregious employee misconduct such as theft, repeated dishonesty, and sexual harassment, if adequate notice is not given, the law will provide damages to the employee as compensation – generally determined by what the employee would have earned during the length of notice that the employee is entitled to. Consequently, there are both statutory and common law obligations employers must then consider to avoid claims for damages. 

In BC, under the Employment Standards Act (“ESA”), at the time of termination provincially regulated employers are obligated to provide a terminated employee:

  • 1 week notice if the employee has provided 3 months of continual service;
  • 2 weeks notice if the employee has provided 12 months of continual service; or
  • If the employee has provided 3 years or more of continual service – an additional week of notice for each additional year of service, to a maximum of 8 weeks.

Under the common law (the law made before the courts), if there is no express contractual term suggesting otherwise, it is implied that the employer must provide “reasonable notice of termination”. The common law requirement may be far more substantial than the requirements under the ESA, depending on the facts of the case. A strict formula is not applied when determining what constitutes reasonable notice. Rather, the court will look at several factors on a case-by-case basis, including the age, length of service, availability of comparable employment, and the nature of employment. 

There are two main differences between the statutory and common law obligations. First, parties can only contract out of the common law requirements in the employment contract. Second, under the common law, the employee has a duty to mitigate the financial losses resulting from termination. In other words, the employee must take reasonable steps to find comparable employment. Therefore, remuneration earned elsewhere during the notice period may be offset against damages awarded. 

Aggravated Damages

Employees may also be entitled to aggravated damages if an employer’s conduct throughout the course of dismissal amounts to being unfair or in bad faith. Aggravated damages are meant to compensate the employee for distress caused in the course of termination. 

The Supreme Court of Canada has affirmed that an employer may be found to be acting unfairly or in bad faith “by being, for example, untruthful, misleading or unduly insensitive”.  Examples include:

  • False allegations of cause or incompetence;
  • Harming the employee’s reputation or causing embarrassment at the time of dismissal;
  • Harassment or sexual harassment prior to dismissal (which can also be a Human Rights claim);
  • Dismissal connected to disability (another Human Rights violation); or
  • Reprisals against an employee (i.e. for attempting to protect their rights).

Punitive Damages

Contrary to the compensatory nature of aggravated damages, punitive damages are meant to punish the employer for its reprehensible conduct. Punitive damages are restricted to intentional wrongful acts that are so malicious and outrageous that they are deserving of punishment on their own, and are only awarded in exceptional circumstances. The employee must show:

  • The actions of the employer were an independent actionable wrong and that they were harsh, vindictive, reprehensible and malicious and generally departed to a marked degree from the ordinary standard of decent behaviour. The conduct should be such that condemnation or punishment is deemed appropriate by a court; and
  • Compensatory damages are insufficient to achieve the goals of retribution, deterrence, and denunciation.

Employer Preparedness

There are various ways in which employers can protect themselves from legal claims while concurrently treating their employees with fairness and respect:

  • Draft employment contracts that specifically deal with the employer’s obligations to a dismissed employee for a “without cause’ termination. This gives both parties clear contractual expectations, rights, and obligations in the event of a “without cause” termination. Ensure that the employee has ample time to review the agreement prior to executing it.
  • Employers can limit their exposure for claims of notice or pay in lieu of notice beyond the statutory minimums by carefully drafting clauses that limit their liability. This might include terms that limit the notice period or aspects of remuneration paid for the notice period. 
  • Draft termination letters with a view of clearly and accurately identifying the employer’s obligations to the employee at the time of termination and providing information to employee’s that they may need in ending the relationship in an orderly fashion without additional stress or aggravation. Ensure that a plan is in place for a respectful, organized course of termination. This will also help prevent claims for aggravated damages. 
  • Ensure that the termination letters accurately reflect the employee’s statutory minimum and contractual entitlements and ensure that the Employee receives these entitlements at the time of termination. This will help prevent any further legal costs that may arise from potential litigation, and any reputational harm that might result from it.
  • Recognize that the employee is vulnerable at the time of termination regardless of the cause.  It is a stressful event for the employee and at times for the employer.  Employers should ensure that terminated employees are treated with respect, dignity and transparency. Regardless of the reason for termination, the Employer should be mindful of the power imbalance between the parties, at the time of termination

The law ensures that employees terminated without cause are given reasonable notice or payment in lieu, and treated fairly and in good faith during the termination process. Nonetheless, many of the costly and time consuming legal issues that may arise as a result of a wrongful dismissal claim can be proactively addressed by forward-looking legal advice suited to the context of your business. 

If you are an employer with questions about wrongful dismissal and/or wishes to take further steps to protect your organization from such claims, or an employee with concerns regarding your legal rights, please contact any member of our Employment and Labour Group.  

Christopher Martin, Lawyers Vancouver, LK Law Christopher Martin
Lawyer | Employment & Labour

This article is intended to be an overview of the law and is for informational purposes only. Readers are cautioned that this article does not constitute legal or professional advice and should not be relied on as such. Rather, readers should obtain specific legal advice in relation to the issues they are facing