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Navigating employment law disputes, particularly claims of wrongful dismissal, can be daunting, especially for start-up businesses. In Ontario, employees who have been wrongfully terminated may seek compensation for various losses. Among the potential avenues for recovery, moral damages play a significant role in recognizing and compensating individuals for the psychological impact caused by their wrongful dismissal. In a recent case before Ontario’s Superior Court of Justice, moral damages were awarded for an employer’s bad faith conduct, shedding light on the circumstances for which this type of damages is awarded.

Moral Damages in Ontario Case Law

The leading test of whether to award damages was developed by the Supreme Court of Canada in Honda Canada Inc. v. Keays. In the case, the Supreme Court reasoned that if an employee makes an allegation of bad faith, the employee is entitled to moral damages “only if they result from the circumstances described in Wallace, namely where the employer engages in contact during dismissal that is “unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive.” The Supreme Court also stated that if the employee can prove that the manner of dismissal caused mental distress, damages will be awarded not through an extension of the notice period, but “through an award that reflects the actual damages.” In other words, employees are entitled to moral damages where the bad faith conduct caused mental distress, and the amount of damages awarded will reflect the actual damages suffered by the employee.

An allegation of bad faith by an employer during the dismissal process was recently contemplated by the Superior Court of Justice in Teljeur v. Aurora Hotel Group.

Employee Terminated without Cause

This case involved an employee who had worked as a general manager for a resort owned by the two defendants. He was employed from October 2018 until he was dismissed from the company in December 2021. No cause was given, although the employer admitted that they had hired an outside management company to fulfill his duties.

Soon after his dismissal, the employee filed a claim for wrongful dismissal and moved to have the Court grant summary judgment.

Employee Seeks Wrongful Dismissal and Moral Damages

The defendants agreed that this matter was suitable for summary judgment, and the Court agreed. The employee argued that he was entitled to reasonable notice of 10 months in addition to 10% of the damages for reasonable notice. The defendants’ position was that the employee was entitled to approximately 3.5 to 5 months’ notice instead and sought a reduction based on the employee’s failure to mitigate his damages. The employee also sought $20,000 for bad faith conduct of the employer, whereas the defendants did not believe he was entitled to any moral damages.

Court Awards Seven Months as Reasonable Notice

The Court first assessed the amount of notice the employee was entitled to. The Court applied the Bardal factors to the analysis, namely:

  • the length of employment;
  • the character of employment;
  • the employee’s age; and
  • the availability of similar employment regarding the employee’s experience, training, and qualifications.

The Court noted that the employee was employed for just over three years, had advanced management responsibilities at the resort (which included training and coordinating employees), was 56 years old at the time of termination, and had a challenging time finding a similar position, “likely due in part, to the COVID pandemic and possibly due to his age.” The Court found that these factors closely matched those in Merida Lake v. La Presse (2018) Inc., where eight months of reasonable notice was awarded for a similarly aged employee in a similar position, industry, and circumstance. Therefore, the Court decided that seven months was a reasonable notice period for the employee in this case.

Insufficient Evidence to Support Employer’s Mitigation Argument

The Court also relied on the same case when dealing with the mitigation argument. It was noted that the decision in Merida Lake v. La Presse (2018) Inc. was appealed based on mitigation. In that case, the employer could not meet the mitigation test because there was no evidence to support the inference that if reasonable steps had been taken, they would have resulted in comparable employment.

There was a similar lack of evidence to support this inference in this case. As a result, the defendants were not entitled to a discount.

Moral Damages Awarded for $15,000

Lastly, the Court considered whether the employee was entitled to moral damages. The Court was presented recorded evidence of the termination meeting by the employee. The conduct of the employer at the meeting included the following:

  • The employee asked for a written termination notice, which the employer agreed to provide. No such notice was ever delivered;
  • The employer did not provide the employee’s entitlement to pay within seven days, as required under legislation. Although a cheque was later received, the employee went through the holiday season “without the benefit of any financial support from his employer.”;
  • Despite agreeing to the reimbursement of expenses incurred as a result of termination, the employer had yet to reimburse the employee;
  • The employer promised to pay eight-week severance in the meeting, then reduced it to the minimum amount required under legislation; and
  • The employee was encouraged to resign.

In the Court’s view, these actions amounted to bad faith conduct. The Court then considered the level of damages, to which the Court accepted the employee’s evidence that he had dealt with significant stress due to the delay in receiving employment insurance and the stress of being terminated. Despite a lack of medical evidence, the Court awarded $15,000 for moral damages.

Contact the Employment Lawyers at Bader Law in Toronto for Advice on Wrongful Terminations and Severance Packages

The trusted employment lawyers at Bader Law help clients understand their employment law rights. In instances of an employment dispute, our team helps clients explore potential legal avenues for resolution while ensuring that their interests remain protected. Our lawyers help clients understand the law that applies to their situation, whether it involves workplace harassment, wrongful dismissal, or severance packages. To schedule a consultation with a member of our experienced employment law team, call us at 289-652-9092 or contact us online.