Relief for Wallace worriers

Appeal court strikes down Wallace award in finding bad faith is more than simply claiming just cause
By Stuart Rudner
|Canadian Employment Law Today

Lack of just cause doesn’t mean bad faith

By now, readers are likely familiar with Wallace damages and they have become part of the boilerplate wrongful dismissal claim despite explicit wording in the Wallace decision itself, which warned against making such claims as a matter of routine. Former Supreme Court of Canada Justice Frank Iacobucci foresaw the danger but was unable to prevent it with his words of wisdom in the 1997 ruling.

In the intervening years since the Wallace decision, there has been some judicial backlash against the indiscriminate use of claims for Wallace damages without any legitimate basis. Justice Randall Echlin of the Ontario Superior Court of Justice in particular has expressed his displeasure with this practice and warned of potential sanctions against employees who perpetuate it.

There hasn’t been a judge that has followed up on Echlin's suggestion and penalized a plaintiff for frivolous Wallace claims. However, the Ontario Court of Appeal recently struck down a Wallace award and may have provided some guidance in determining when an employer’s conduct constitutes bad faith in the course of dismissal and when it doesn’t. If anything, the decision indicates a claim for Wallace damages doesn’t necessarily mean an employee is entitled to them, even if just cause isn’t found.

It’s become common in wrongful dismissal claims for there to be an assumption of bad faith on the part of the employer in the course of dismissal, which means these claims are often accompanied by a request for extra damages as in the landmark