Bad Faith and Unfair Dealing
Employers are held to a duty of good faith and fair dealing when dismissing their employees. An employer's failure to fulfil this obligation may amount to bad faith and unfair dealing. Consequently, bad faith and unfair dealing are issues that are often raised in cases involving the wrongful dismissal of an employee. The Supreme Court of Canada created this obligation of good faith and addressed the corresponding concept of bad faith at length in 1997 in the seminal case of Wallace v. United Grain Growers Limited [1997] 3 S.C.R. 701 (SCC). Justice Iacobucci, writing for the majority, stated 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 in bad faith by being, for example, untruthful, misleading or unduly insensitive."
The rationale underlying the Supreme Court of Canada's position is due to the particular nature of the employment relationship, specifically, the power imbalance that exists between employees and their employer. In recognition of this special dynamic, the Supreme Court of Canada has determined that employers should be held to an obligation of good faith and fair dealing in the course and manner of dismissing their employees. The penalty for breaching this good faith obligation will be an increase in the length of the notice period the employer will be required to give the dismissed employee. This is known as the "Wallace Factor" (Prinzo v. Baycrest Centre for Geriatric Care [2002] O.J. No. 2712 (Ont. C.A.))
Although employees are not entitled to be compensated for injuries arising from the fact of the dismissal itself, if the employer's conduct in dismissing the employee was in bad faith or unfair, injuries sustained by the employee, including humiliation, embarrassment and damage to one's sense of self-worth and self-esteem, may be worthy of compensation. If a court finds that the employer engaged in bad faith conduct in the manner of the employee's dismissal, the employee may be compensated by an extension of the reasonable notice period to which the employee is entitled.
In Wallace, the Supreme Court of Canada implied that damages arising from the bad faith conduct of the employer were limited to injuries sustained by the employee at the very moment of the dismissal. However, in the 2003 decision of Gismondi v. Toronto (City) (2003) O.J. No. 1490, the Ontario Court of Appeal expanded the target period of time for which bad faith and unfair dealing in the manner of dismissal can be found. In Gismondi, the court held that,
"...Wallace damages are not limited to acts of the employer at the very moment of dismissal and can in appropriate circumstances include the employer's conduct pre-and post-termination...and the conduct of the employer in its aftermath, but only...as a component of the manner of dismissal."
According the Ontario Court of Appeal, conduct by an employer that is good intentioned, but sloppy does not justify an increase in the notice period. Bad faith conduct justifying an increased notice period must involve intent, malice or blatant disregard for the employee. The court characterized this conduct as "callous and insensitive treatment" or "playing hardball".
In Wallace, the Supreme Court of Canada cited several examples of bad faith conduct during the course of dismissal, including the following:
- An employer wrongfully accused an employee of being involved in a theft and communicated the accusation to other potential employers of the dismissed employee. (Trask v. Terra Nova Motors Ltd. (1995), 9 C.C.E.L. (2d) 157)
- An employer wrongfully accused an employee of theft and refused to provide a letter of reference after the termination. (Jivrag v. City of Calgary (1986), 13 C.C.E.L. 120)
- After an employee's position was eliminated he was told that a new position would probably be found for him and that it would require a transfer, however unbeknownst to the employee, management was contemplating his termination and when a position could not be found, the employee was terminated - yet the decision to terminate was withheld from the employee for a month despite the fact that the employer knew he was selling his house in anticipation of the transfer. (Dunning v. Royal Bank (1996), 23 C.C.E.L. (2d) 71)
- An employer decided to fire the employee while he was on disability leave due to major depression. The employee informed the employer of when he would be returning to work and was fired immediately upon his return. (Corbin v. Standard Life Assurance Co. (1995), 15 C.C.E.L. (2d) 71)
- An employer closed its bar for 3 months and laid off the employee bartender. While the bar was closed, the employer decided to hire another bartender at a lower salary, but did not inform the employee of his termination. The employee discovered his termination after seeing the advertisement for his position in the newspaper. (MacDonald v. Royal Canadian Legion (1995), 12 C.C.E.L. (2d) 211)
Since Wallace, the courts have continued to canvass the issue of bad faith, expanding the list of bad faith conduct in the manner of dismissal to include the following behaviours:
- An employer decided to terminate an employee after being informed of a false allegation against an employee and without asking the employee for his side of the story or without informing him of the circumstances surrounding the allegation. (Buchanan v. Geotel Communications Corp. (2002), O.J. No. 2083)
- An employer terminated the employee after she expressed concern regarding the corporate illegality engaged in by the employer. (Mark v. Westend Development Corp. (2002), O.J. No. 2702)
- An employer dismissed the employee by email rather than having a meeting with him and wrongfully alleged (and maintained) the position throughout trial that the employee had resigned, thus not being entitled to any damages. (Farrell v. WorkGroup Designs Inc. (2005), O.J. No. 310)
- An employer falsely accused the employee of forgery and threatened to lay criminal charges if he did not sign a letter of resignation. (Noseworthy v. Riverside Pontiac-Buick Ltd. (1998), 168 D.L.R. (4th) 629)
- An employer maintained that it had just cause to terminate the employee until just before trial, failed to pay commissions it had acknowledged were owing to the employee, and delayed sending her the record of employment necessary to receive unemployment insurance benefits. (Marshall v. Watson Wyatt & Co. (2002), 57 O.R. (3d) 813)
- An employer made unfounded allegations against the employee of poor performance, harassment, intimidation and threats, which made it impossible for the employee to find alternative employment. (Antonacci v. Great Atlantic & Pacific Co. of Canada (2000), 181 D.L.R. (4th) 577)
- An employer harassed the employee while she was on disability leave, accused her of malingering, wrote a letter her falsely implying that her doctor said she was fit to return to work and when she did not return to work, told her she would be terminated. (Prinzo v. Baycrest Centre for Geriatric Care [2002] O.J. No. 2712 (Ont. C.A.))
- An employer, when giving the employee a letter of termination, including an inadequate offer of severance pay and a restrictive covenant, told the employee that if he did not accept the offer he would be terminated for cause and would not receive anything. The employer knowingly terminated the employee just before his wedding. (Kroll v. 949486 Ontario Inc. (1997), 34 C.C.E.L. (2d) 78)
- An employer dismissed the employee without cause and told her over the telephone that a letter would be sent to her informing her of the termination. (Brougham v. Carrier-Sekani Tribal Counsel (1998), B.C.J. No. 2319)
- An employer terminated a long term employee in poor health via letter. Given the employee's loyalty and hard work, he was justified in expecting that he would be treated fairly and not be dismissed without a generous notice period being provided. (George v. Imaginnering Ltd. (2001), O.J. No. 4315)
- An employer terminated an employee with Chronic Fatigue Syndrome after the employee refused to see his employer's physician following more than a year of disagreement over the severity of the employee's illness. The letter sent from the employer to the employee presented a "twisted" view of his condition. The employer continued to threaten to terminate the employee unless he agreed to meet with the employer's appointed physician while the employee's lawyer was attempting to negotiate a resolution. The employer was trying to "set up" the employee by asking him to see the physician as the physician was already of the view that his illness was not serious. (Keays v. Honda Canada Inc. (2005), O.J. No. 1145)