A bump up from the ‘Wallace bump’

New regime of bad-faith damages not always good news for employers
By Stuart Rudner
|Canadian Employment Law Today|Last Updated: 02/10/2010

In the summer of 2008, the Supreme Court of Canada rendered its groundbreaking decision in Keays vs. Honda Canada. Among other things, the Supreme Court, on its own initiative, elected to revisit the nature of damages awarded in circumstances where the employer does not act in good faith in the course of dismissal. Prior to that, courts awarded what we have come to know as a “Wallace bump” in circumstances where bad faith had been found. However, the Supreme Court of Canada in Keays chose to replace this arbitrary approach with one based upon a compensatory analysis. As I and other commentators reported, the wording of the Supreme Court’s decision suggested that in the future, “the damages formerly known as Wallace” would not be awarded as frequently, since a plaintiff would have to show not only that the employer had acted in bad faith, but this bad faith caused the employee to suffer some form of actual damages. Although I predicted that these awards would be made less frequently, I also suggested that in the right circumstances, employees may be able to prove more substantial damages and the awards could be greater under the new regime.