Wallace damages not automatic

Despite extra damages becoming common and often a part of claims, an employer can still avoid them as long as it acts in good faith
By Natalie MacDonald
|Canadian Employment Law Today

It’s been 10 years since the Supreme Court of Canada ruled Jack Wallace was entitled to extra damages in lieu of notice because of the bad faith his former employer demonstrated in firing him and the extreme effects it had on him. This set the tone for courts to punish employers for bad-faith treatment of employees, making wrongful dismissal cases potentially more expensive for employers.

However, now that Wallace damages have become a common element in wrongful dismissal decisions, dismissed employees are now expecting them as a regular outcome of wrongful dismissal findings, even where they aren’t warranted. Rather than being an extra award decided by the courts, Wallace damages are often included in a wrongful dismissal claim. Courts may be responding to this expectation by becoming more reluctant to award them and may even start to punish wrongfully dismissed employees for undeserving claims.

Recent decisions by the British Columbia Supreme Court and the Ontario Superior Court of Justice show if employers make a genuine effort to assist employees and act in good faith when terminating them, they should be off the hook for Wallace damages even if there is a finding of wrongful dismissal and the employee claims bad faith by the employer.