Damages for bad faith in dismissal: an update

In 1997, the Supreme Court ruled in Wallace v. UGG that the period of reasonable notice required to terminate an employee can be ‘extended’ when the employer engages in ‘bad faith in the manner of dismissal’.  What that meant took some time to sort out.  But in the years since, it became fairly common for courts to add several months’ worth of pay to wrongful dismissal awards when the court ruled that the employer was insensitive and harsh in the way it dismissed an employee.  There was no need for the employee to actually prove she suffered extra financial harm as a result of the bad treatment:  courts would just add on additional notice time to the amount of notice they otherwise would have ordered.  These awards became known as “Wallace Damages”.
The range of employer conduct that would lead to Wallace Damages grew, and includes:
*  verbal abuse of the employee, or making false allegations of incompetence or cause for dismissal
*  failing to conduct a competent investigation of alleged wrongdoing by the employee
*  failing to give the employee an opportunity to give her side of the story when alleged wrongdoing is involved
*  using hardball tactics, like pressuring employee to sign a legal release without legal advise
This is a very short part of a long list of employer conduct that judges have punished.   More recently, SCC revisited Wallace in case a Honda Canada v. Keays.   That was an interesting case for a number of reasons. But for our talk here, it is noteworthy that the court ruled that damages for bad faith in the manner of dismissal could no longer be awarded by simply extending the notice period.  Instead, the employee had to prove she suffered actual damages, and if she did, she is entitled to the total amount of those damages.  So the employee must now prove harm.
So the moral for HR Managers is that you need to be kind and professional in the manner in which you dismiss employees.  Courts want employers to respect the fact that this is a traumatic event for the employee. Think biblical:  treat the employee like you would want to be treated.