People may not always end on the best terms at the end of an employment relationship. There may be concerns over how an employee was terminated, and the employer’s conduct can play an important role in determining the damages owed if there has been a wrongful dismissal. If the employer acted in bad faith, they may owe the terminated employee moral damages on top of what they needed to pay as part of the reasonable notice period. These damages can be significant, as in Teljeur v. Aurora Hotel Group, 2023 ONSC 1324, in which the employer was ordered to pay $15,000 in moral damages to the employee for bad faith conduct during the termination. Whether the employer’s conduct rises to the level of bad faith highly depends on the circumstances of the case.

In this post, we will discuss the factors determining whether an employee can receive moral damages due to bad faith from the employer. We will examine the Teljeur case as an example of where the employer’s conduct resulted in significant moral damages. This post will provide important takeaways for employees seeking to understand their rights from wrongful dismissal and for employers seeking to understand their obligations when terminating an employee.

What additional damages can an employee receive due to the employer’s conduct during termination?

Generally, upon a wrongful termination, the employee can receive pay in lieu of their reasonable notice period, which varies depending on the facts of the case. Employees are entitled to prompt payment of their minimum compensation under the Employment Standards Act.

Beyond these forms of compensation, the employee may also be entitled to moral or aggravated damages on top of these payments. Moral damages may be available if the employer acted in bad faith during termination. In particular, moral damages are only available if the employer engaged in unfair or bad faith conduct, such as being untruthful, misleading, or unduly insensitive. Given the power dynamic between employers and employees, with employees generally in a vulnerable position, the courts have recognized that moral damages may be appropriate if the employer exacerbates the difficulties arising from a termination.

When may an employee receive moral damages for a wrongful termination?

A high standard exists to find that moral or aggravated damages should be awarded in a wrongful dismissal case. For instance, the employer’s conduct must have risen to the level of being unfair and in bad faith, which can include being untruthful, misleading, or unduly insensitive to the employee. While the claim may involve the employee’s mental distress, finding an independent actionable wrong is no longer necessary before moral damages can be awarded to an employee upon termination.

For wrongful dismissal cases, damages arising from an employer’s bad faith conduct should be separate from the damages as part of the reasonable notice period. In other words, the court is not to extend the reasonable notice period if the employer acted in bad faith because the moral damages are to be assessed similarly to other cases that address moral damages.

The court will consider the following factors to determine if moral damages should be awarded:

a)    The employer has breached its duty of good faith and fair dealing in the way that the employee was dismissed;

b)    The employer’s breach of good faith or fairness can include if the employer’s conduct was untruthful, misleading, or unduly insensitive;

c)     The employer failed to act in a way that was candid, reasonable, honest, and forthright with the employee;

d)    The employer could have reasonably known that the manner of dismissal would cause the employee mental distress;

e)    The employer’s wrongful conduct must have caused the employee’s mental distress beyond understandable distress and hurt feelings that are typically associated with a termination;

f)      The grounds for moral damages are to be assessed depending on the unique circumstances of the case.

Notably, not all forms of distress or discomfort arising from a termination will result in moral damages, as the court recognizes that termination will usually be difficult.

Also, it can be difficult to determine when moral damages may apply as it highly depends on the facts of the case. We will discuss an example using the Teljeur case below to illustrate how an employer’s conduct may be considered in bad faith during a termination.

Employer Required to Pay $15,000 for Bad Faith Conduct During Termination

In the Teljeur case, the employee worked as a general manager for a resort. After three years, he was terminated as the employer decided to hire an external management company in place of the employee’s role.

The court found that the employer had acted in bad faith and should pay moral damages to the employee. While the court recognized that the employee secretly recorded the termination, and this was not to be encouraged, the recording revealed some concerns about the employee’s termination.

For instance, the Employment Standards Act requires that terminations be produced in writing to employees. During the termination meeting, the employee asked several times for his termination to be in writing. The employer agreed, but written termination was never provided.

Under the Employment Standards Act, the employer was also required to provide his final pay within 7 days of the termination or the next payday. However, the employer did not mail the final cheque until over a month after the termination meeting. When the employee claimed that he had yet to receive the cheque, a new one was reissued 6 months later in June. Even when accounting for when the first cheque was mailed out, there was a significant delay from when the employer was required to provide the minimum payment to the employee. As a result, the employee also did not have the benefit of pay over the holidays. This was considered to be bad faith conduct.

The employee was also promised 8 weeks severance, but this was never provided. The employer also did not reimburse the employee for out-of-pocket expenses of almost $17,000. This represented a significant portion (almost a quarter) of the employee’s income and was considered a significant financial burden. These actions also contributed to a finding that the employer acted in bad faith.

The court awarded the employee $15,000 in moral damages for the employer’s bad-faith conduct.

Contact Haynes Law Firm in Toronto for Advice on Termination and Wrongful Dismissal Claims

Employers may be subject to moral damages for bad faith conduct during a termination. Our experienced employment law legal team at Haynes Law Firm in Toronto can assist you with issues that arise from termination. We aim to ensure that employees understand their rights and receive maximum compensation in wrongful dismissal cases. Haynes Law Firm also assists employers in avoiding liabilities arising from terminations not permitted by the legislation. We are dedicated to finding the best resolution for you.

To book a consultation, please contact us online or by phone at 416-593-2731.