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Moral damages: still an unsettled question

dollarsignA recent case out of the Quebec Superior Court Lysecky v. United Parcel Service of Canada Limited 2010 QCCS 5098 is indicative how the question of “moral damages” is still unsettled law.

For those who may be unaware, moral damages are damages that may be payable to plaintiffs in wrongful dismissal suits where the employer is found to have conducted itself in bad faith during the termination. These damages were originally called Wallace damages after the decision in Wallace v. United Grain Growers where the Supreme Court of Canada ruled that an employee could have an extension to his notice period where a dismissal was conducted in bad faith. In the more recent case of Honda v. Keays the Supreme Court changed its position on Wallace damages by holding that while damages would still flow from bad faith dismissals they would be calculated in a different manner. At paragraph 59 of Honda the Court ruled as follows:

Moreover, in cases where damages are awarded, no extension of the notice period is to be used to determine the proper amount to be paid. The amount is to be fixed according to the same principles and in the same way as in all other cases dealing with moral damages. Thus, if the employee can prove that the manner of dismissal caused mental distress that was in the contemplation of the parties, those damages will be awarded not through an arbitrary extension of the notice period, but through an award that reflects the actual damages. Examples of conduct in dismissal resulting in compensable damages are attacking the employee’s reputation by declarations made at the time of dismissal, misrepresentation regarding the reason for the decision, or dismissal meant to deprive the employee of a pension benefit or other right, permanent status of instance (see also the examples in Wallace…)

The interesting phrase in Honda is “the amount is to be fixed according to the same principles and in the same way as in all other cases dealing with moral damages.” The common law provinces had no prior conception of “moral damages.” Moral damages are a concept that arises from the civil law of Quebec. Accordingly, the question of how precisely moral damages would be determined at the common law was an open one after Honda.

The direction in the Courts common law provinces to date seems to require that such damages will need to be proved. For example in Fox v. Silver Sage Housing Corporation 2008 SKQB 321 the Court of Queen’s Bench in Saskatchewan found that there was bad faith in the dismissal (by claiming that an employee was terminated due to a budget cut when in fact the employee was targeted for personal reasons). However even though bad faith was found, the Court did not award damages for the manner in which he was dismissed ruling at paragraph 39:

…He did not require counselling. He received a letter of reference, and there is no evidence that the manner of his termination or events surrounding his termination affected his ability to obtain further employment.

However, the Lysecky case, which was decided in Quebec, the Court was more familiar with the concept of moral damages, did not require any proof of counselling or similar. At paragraph 17:

The Court also feels that Mr. Lysecky is entitled to moral damages. He was literally treated like a criminal, which he was not, and his employer did nothing to stop rumours about alleged kickbacks, even after Lysecky’s departure. These rumours permitted to camouflage UPS Canada’s own inter-managerial problems in that it was much easier to let the rumours ride then to admit to its own lack of supervision or verification of supporting documents before issuing payment cheques as well as its own lack of judgement in its manner of dealing with Lysecky’s termination.

The Court did not require any proof of mental distress. It awarded Lysecky $20,000.00 and noted at paragraph 125:

One’s own reputation of honesty is so precious that an unwarranted attack upon it cannot be left without proper reparation. Here, the manner in which the termination was affected and the tolerance of untrue rumours about the plaintiff’s honesty warrant the award of such damages.

In short, it seems that the Supreme Court in Honda has occasioned a major divide between Common and Civil law with regard to its importation of the concept of moral damages into Common law. I would anticipate that this matter will likely remain fairly contentious and unsettled until yet another employment case makes its way up to the Supreme Court.

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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