Over the course of my career as an Employment Lawyer, I have heard every “rule” about dismissals, including
- Never fire someone on a Friday as it will ruin their weekend
- Never fire someone on a Monday as it will ruin their week
- Never fire someone before a vacation / birthday / wedding
- Never fire someone after a vacation / birthday / wedding
- Never fire someone “around the holidays”
- Never fire someone in the morning
- Never fire someone in the afternoon
If you take all of these rules into account, it seemed like there was only one safe hour or so every year during which dismissals could take place!
We also have rules about how to conduct the dismissal. In pre-pandemic times, the rule I usually heard was that it had to be done in person, and it was not unusual for a manager to travel hundreds of kilometres just to have a face to face termination meeting. What was worse were incidents where the employee was made to travel for a “meeting”, only to spend five minutes being told they had been dismissed and then left to pick up the pieces. In most cases they would have been much happier to stay home and be told by video or even telephone. On the bright side, now that everyone has gotten accustomed to remote meetings, dismissals via Zoom have become more acceptable.
None of these are actual rules, and breaching any of them will not, in and of itself, lead to a finding that the company acted in bad faith. The bottom line is that individuals should be treated with dignity and respect; that should be true at all times, but particularly at the time of dismissal. They should not be called into a boardroom in circumstances where it will be obvious to everyone around them what is going on, and then forced to walk past all their colleagues after being given the news. An employer should not be abusive, lie about the reason for the dismissal, or manufacture allegations of just cause when there is clearly no basis for them.
In the world of employment, Wallace v. United Grain Growers Ltd. established a duty on the part of employers to act in good faith while in the course of dismissal. In the decade or so following that decision, virtually every wrongful dismissal included an allegation of bad faith. Subsequently, there were several important decisions by our appellate courts which reined in the notion of bad faith, making it clear that we need to take the term “bad faith” seriously and not apply it haphazardly. Then came Honda Canada Inc. v. Keays, where the Supreme Court of Canada had the chance to revisit the duty of good faith and limit its application to cases where the plaintiff could prove 1) actual bad faith and 2) that they suffered damages arising out of the bad faith conduct.
Keays seemed to curtail the number of bad faith allegations for a while, but Bhasin and subsequent cases seem to have reinvigorated plaintiff counsel, and we see a lot of bad faith claims. In my mediation practice, I have observed that in most cases where there is an allegation of bad faith, it is not even mentioned or pursued at mediation. Unfortunately, that undermines the legitimate claims.
In 2161907 Alberta Ltd. v. 11180673 Canada Inc., the Trial Court found that there was bad faith in the termination of a commercial contract:
…216’s termination of the agreements was not done in good faith. While I do not find that 216 lied to 111, it pounced on a single statement made by Mr. Heydon as a basis to trigger default, thereby achieving its goal of ending the relationship with Mr. Heydon and attempting to discharge its obligation to pay the Branding Fee.
While this was not an employment case, the principles are particularly relevant to the Employment Law Bar, as wrongful dismissal claims are filled with allegations of bad faith when, in most cases, there is no legitimate basis for them.
In that case, the Court of Appeal rejected the finding that the Defendant had acted in bad faith. In so doing, the Court of Appeal took the opportunity to remind us of what the duty of good faith entails:
[43] Good faith requires “simply that parties generally must perform their contractual duties honestly and reasonably and not capriciously or arbitrarily”: Bhasin, at para. 63. The duty requires that “in carrying out his or her own performance of the contract, a contracting party should have appropriate regard to the legitimate contractual interests of the contracting partner”: Bhasin, at para. 65. It does not require that contracting parties serve each other’s interests. However, they may not seek to undermine those interests in bad faith.
[44] In Bhasin, the court identified four distinct legal doctrines operating as manifestations of the general organizing principle: 1) the duty of cooperation between the parties to achieve the objects of the contract; 2) the duty to exercise contractual discretion in good faith; 3) the duty not to evade contractual obligations in bad faith; and 4) the duty of honest performance. These doctrines generally reflect the situations and relationships in which the law requires contracts to be performed honestly, and reasonably, and not capriciously or arbitrarily. Accordingly, the list of recognized duties is not closed: Bhasin, at para. 66.
The Court of Appeal summarized the allegations of bad faith:
48] In what follows, I address four potential sources or instantiations of bad faith: first, that 216 knowingly misled 111; second, that 216 “pounced” on a default that it did not believe had occurred; third, that 216 sought to evade payment of the Branding Fee in bad faith; and fourth, that 216 seized upon a breach of its own making as in Mason v. Freedman, 1958 CanLII 7 (SCC), [1958] S.C.R. 483.
In addressing these four bases for alleging bad faith, the Court of Appeal found that:
- 216 did not knowingly mislead 111;
- the finding that 216 had a desire to end its relationship with 111 and chose to “pounce” on what, incorrectly, it saw as providing the opportunity to do so was not sufficient to justify a finding of bad faith;
- a party that manufactures an artificial reason to terminate a contract in order to avoid future payment obligations would likely be found to have acted in bad faith. However, as explained above, 216 believed the termination was justified. The fact that termination releases a party from making a significant payment does not amount to bad faith, even where a court later finds that the termination was invalid; and
- it would not be appropriate to characterize 216’s error as bad faith simply because that error set in motion the events that would culminate with 216’s invalid termination of the License Agreement.
Pith and substance
The bottom line is that some conduct, even if not perfect, is not bad faith. That is particularly true in the context of dismissal. With respect to all the “rules” mentioned above, the reality is that this is entirely subjective; I have had clients complain that their manager did not have the courtesy to dismiss them in person, whereas others have bemoaned the fact that they had to go to work just to be let go and wished it had been done by phone. In order to be entitled to compensation for a brief of the duty of good faith, an plaintiff must prove that 1) the defendant acted in bad faith, which requires more than something trivial such as scheduling a dismissal meeting on a Friday afternoon, and 2) that the plaintiff suffered damages as a result of the bad faith, which requires more than the “usual upset” experienced when someone loses their job.
“Bad faith” means bad faith, and not just unfortunate circumstances.
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- Independent contractor awarded damages for termination of fixed-term contract without notice - January 5, 2024
Chris Budgell says
My own long engagement with the legal system began with a workplace termination. I’m not sure if the term “bad faith” was part of my vocabulary back then. Ordinary people use terms like “dishonesty”. The term “bad faith” appears in the statute provision that enabled me to take a claim to the British Columbia Labour Relations Board. That provision uses the stock “duty of fair representation” language found everywhere in North America.
I would challenge anyone to go through the BCLRB’s extensive record on CanLII and find any decisions that expressly say the union acted in “bad faith”. Maybe there are some. I don’t recall ever finding any. So there is a situation that appears to be the opposite of what this article claims.