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Honda damages continue to be moving target

A recent case from the Alberta Court of Appeal suggests that Honda damages, previously known as Wallace damages, are becoming less of a threat for employers in wrongful dismissal suits.

Honda damages are rooted in the idea that bad faith dismissals should result in compensatory damages to employees. They were created by the Supreme Court of Canada in the well known case of Wallace v. United Grain Growers. In that case, the Supreme Court held that bad faith dismissals should be compensated and that this should be done so by an extension of the notice period normally given to wrongfully dismissed employees.

In Honda v. Keays, the Supreme Court modified Wallace, holding that while bad faith dismissals should still result in damages, the damages should be compensated based on the actual harm done rather than an extension to the notice period. They used the principle in Hadley v. Baxendale to suggest that such damages would have been in the contemplation in the minds of the parties at the time of the formation of the contract because bad faith at the time of dismissal would not be something that any individual would place into their contract.

The Court in Honda also held that such damages were to be awarded in a manner similar to “moral damages,” a concept from Quebec civil law. However, in most ensuing decisions on this point, the courts have ignored this concept and instead focused on the idea that the Honda damages are to compensate for the harm actually done.

The most recent case in this line of cases is Elgert v. Home Hardware Stores (2011 ABCA 112). In that case, a jury in the lower court had awarded the Plaintiff $200,000.00 in Honda damages following a faulty and negligent investigation by the employer that led to its dismissing of Elgert. The facts of the matter showed that Mr. Elgert had not committed any misconduct and the shoddy investigation only compounded the difficulty.

On appeal, the majority of Alberta Court of Appeal reduced that $200,000.00 award to $0, holding that there was not a “scintilla of evidence” to support an award of aggravated damages.

Although the Plaintiff had led evidence that he was extremely upset by the manner in which the termination was carried out, the Court held that this was insufficient evidence to support and therefore overturn the jury’s finding.

Interestingly, the dissenting judge did find that there was enough evidence in the record to support a finding of aggravated damages. In fact, the dissenting judge pointed to the same evidence that was dismissed by the majority and suggested that it was sufficient.

In conclusion, the Elgert case is yet another case that shows that the Courts are extremely reluctant to award aggravated damages in light of Honda. Moreover, it shows that Courts are continuing to ignore the Supreme Court’s direction on “moral damages.” This is good news for employers, as it appears they are facing a reduced risk of damages for bad faith behaviour that takes place during a termination.

Andrew D. Taillon
Cox & Palmer

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Andrew Taillon

Andrew Taillon was a lawyer in Cox & Palmer‘s Halifax office. He practiced mainly in labour, employment and litigation. Now he is a Barrister & Solicitor at Nova Scotia Department of Justice. Read more
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