Unravelling the Mystery of Damages & Compensation Available to Employees

Thousands of employees across Canada each year experience unfair treatment and/or inappropriate behaviour by their employers.  This can take a wide range of forms, from unpaid wages, unilateral cuts to compensation, denial of bonuses, harassment, or discrimination in violation of human rights. 

While employees are aware when wronged, understandably they can become frustrated when it comes to understanding clearly what remedies are available to them. This is understandable as employment laws are complex and varied and cross along both administrative tribunals and civil courts. 

The following is an attempt to begin to unravel and simplify the law as it relates to items that employees can sue to secure from their employer/former employer.  

The law provides employees with a range of routes or potential “remedies” in order to provide balance for wrongs that occur at work or in the termination of their employment:

• Wrongful Dismissal Damages (i.e. “notice”, “pay in lieu of notice” or “severance”)
• Extraordinary Damages
• Human Rights Damages
• Reinstatement (in rare circumstances)

The following summarizes the basis for each of these opportunities for compensation (or additional awards). 

Wrongful Dismissal Damages

Employers in Ontario and Canada are permitted to terminate the employment of any employee as long as they abide by statutory, contract and, where applicable, common law with respect to affecting that termination.

Employers are expected to provide their employees with “reasonable” notice of the termination of their employment. When they fail to do so (either because they fail to provide notice in accordance with the employment standards legislation, the employee’s contract and/or the common law) employees can seek damages for pay in lieu of the notice to which they were entitled. 

This type of compensation is known as damages for wrongful dismissal and is the most common remedy claimed in employment lawsuits. The amount available to wrongfully dismissed employees includes, for example, termination pay, severance, past and future commissions, bonuses, and amounts to compensate for the loss of employment benefits, pension and equity (i.e. lost stock options/shares in relation to inadequate termination pay).

Extraordinary Employment Law Damages

Employees may be entitled to compensation for extraordinary damages. These are related to the manner in which they were treated at work and in the dismissal of their employment. Extraordinary damages include but are not limited to the following:

• Damages for bad faith during termination (also known as aggravated/moral damages)
• Punitive damages
• Damages for intentional/negligent infliction of mental distress
• Damages for defamation
• Damages for breach of privacy
• Damages for inducing breach of contract
• Damages for malicious prosecution
• Inconvenience damages
• Damages for personal injury (i.e. negligence, assault or sexual assault)
• Damages for unlawful interference with economic relations

Below we provide some further details on the more commonly claimed extraordinary remedies; aggravated and punitive damages.

Aggravated or “Moral” Damages

Aggravated or “moral” damages are available to employees when an employer conducts itself during an employee’s employment or in the termination of its employment in a manner that is deemed to be unfair or in bad faith. 

Aggravated damages are intended to compensate an employee for damages they have suffered as a direct result of their employer’s unfair treatment. It is not, however, “punishment” money, meaning the court is not authorized to grant aggravated/moral damages to an employee as punishment for the employer’s conduct. It must be a dollar-for-dollar compensation for provable losses as a result of the employer’s unfair and/or bad faith conduct. 

Whether an employee is awarded bad faith damages depends heavily on a court’s interpretation of the facts. To grant damages for this reason judges will likely look for evidence of conduct that is untruthful, misleading, insensitive, or humiliating. Some common and reoccurring themes that have resulted in aggravated damages include the following:

• False allegations of cause or incompetence
• Harming the employee’s reputation or causing embarrassment at the time of dismissal
• Harassment or sexual harassment prior to dismissal
• Dismissal connected to disability
• Reprisals against an employee (i.e. for attempting to secure their rights)

Punitive (Punishment) Damages

Aggravated damages and punitive damages are awarded for separate purposes despite that they can come from the same employer misconduct. 

Aggravated damages are awarded where the employer’s conduct personally, and detrimentally, affects an employee beyond the general impact that termination inevitably has on one’s well-being. Alternatively, punitive damages are not intended to compensate the employee but rather are awarded to punish the employer for its reprehensible conduct.

To be awarded punitive damages, an employee would need to show that:

1. The actions of the employer were an independent actionable wrong and that they were harsh, vindictive, reprehensible and malicious and generally departed to a marked degree from the ordinary standard of decent behaviour. The conduct should be such that condemnation or punishment is deemed appropriate by a court; and
2. Compensatory damages are insufficient to achieve the goals of retribution, deterrence, and denunciation.

Courts consider punitive damages as something which should be granted only in exceptional circumstances, where it is important to deter the behaviour. 

Damages for a Violation of Human Rights in the Workplace

Human rights legislation across Canada protects employees from discrimination and harassment on a range of protected grounds. There is variation in the grounds depending on the province but generally, it includes factors such as race, religion, age, gender, and sexual orientation. 

Employees are entitled to bring an application at the appropriate human rights tribunal for a breach of their human rights if they feel they have been harassed or discriminated against on a protected ground. 

Human rights tribunals and courts have significant power to award damages for a violation of human rights.  For example, Ontario courts and the Ontario Human Rights Tribunal is empowered to order an employer to pay an employee an amount in recognition of a violation of their human rights. 

Reinstatement

In most cases, employees who have had their employment wrongfully terminated are limited to compensation to assist them in moving to alternative employment (in addition to potential additional compensation/payments relating to unfair treatment). In some cases, however, an employee can apply to be reinstated to their previous role. 

Specifically, some statutes (such as the Human Rights Code and the Occupational Health and Safety Act), allow for employees to be reinstated to their previous role. Some protections are as follows:

• The Occupational Health and Safety Act specifically allows for reinstatement of a discharged employee with reimbursement of lost wages from the date of the discharge up until the date of the reinstatement.

• Both provincial and federal human rights legislation provide for reinstatement of employees to their previous positions if there is a breach of human rights. Employees can also be granted compensation for lost wages since the loss of their employment to the date of reinstatement. 

• Federally regulated employees who bring forward a claim for unjust dismissal can seek reinstatement (if the arbitrator finds such a remedy is appropriate).

• Employees governed by Ontario law can be reinstated to their previous role by the Ministry of Labour if their dismissal is found to have been in violation of a protected right to a leave of absence.

Civil courts generally do not grant reinstatement. This means that employees must bring their claim/application at the appropriate administrative tribunal if they wish to be reinstated to their role. An employee who is not provided with a favourable decision is able to appeal the decision at the Divisional Court through a Judicial Review. This is a civil court proceeding intended to ensure that administrative tribunal decisions are proper under the law. 

Limits on What an Employee can Recover: The Concept of Remoteness

To be granted damages/compensation, employees must demonstrate that the remedy they are seeking is not too “remote”. This means an employee must convince the decision-making body (tribunal, ministry or court) that there is a sufficient connection between what they are seeking and the employer’s actions. 

The concept of remoteness is intended to place reasonable limits on what an employer is responsible for paying to an employee in relation to improper/illegal conduct. 

The test is specifically whether the harm (and the related claimed amounts) is too far removed from the wrongful conduct that it would be unjust to hold the employer liable. Employees are therefore not entitled to damages/compensation for amounts that are deemed to be too remote (i.e. where you cannot make the direct connection between the conduct and the harm suffered).

If you have questions about what kinds of remedies you may have access to in any legal claim against your ex-employer, or if you have questions relating to termination, wrongful dismissal, discrimination, or otherwise, please contact Toronto employment lawyers, Sultan Lawyers at 416-214-5111 or here.