What is “Bad Faith” in a Termination?

The term “bad faith” stems from an employer’s legal obligation to act in good faith when terminating an employment relationship. A bad faith termination is when an employer has breached their duty to act in good faith upon termination, and, as a result, the employee may be compensated for the employers’ actions.

What are an Employer’s Obligations When Terminating an Employee?

There is no written law that binds an employer to abide by specific protocols and requirements upon termination, aside from the regulations in the Employment Standards Act, where applicable. It can be considered a grey area when determining whether an employer is acting in bad faith or not. Accusations of an employer acting in “bad faith” can be subjective if insufficient information to prove exists

That said, remedies are subject to a court’s discretion and are primarily based on common law principles. While there is not a statute that defines bad faith conduct, case law sets out the preferred attributes of an employer’s conduct when terminating an employee:

• Honest, truthful, and straightforward;
• Free from deception;
• Reasonable and appropriate under the circumstances and;
• Sincere.

Generally, the employee has the right to be dismissed in a fair, just, and non-arbitrary manner. An employer’s failure to fulfill the obligation to act in good faith upon termination may result in the employee being awarded compensation and/or additional damages for bad faith and unfair actions.

One factor that may contribute to an employer acting in bad faith is the power imbalance between an employer and an employee. This can increase the employee’s vulnerability to unfair dealings and conduct. Situations such as these may leave the employee feeling helpless, disadvantaged, and abandoned.

Because no one factor determines bad faith conduct, the test for proving bad faith in the manner of dismissal is very contextual.

WHEN IS AN EMPLOYER ACTING IN BAD FAITH?

Bad faith conduct occurs when an employer fails their duty to act in good faith upon dismissal in accordance with common law principles (i.e. the employer fails to be open, reasonable, truthful, and straightforward with the employee), and the minimum requirements of the Employment Standards Act. An employer may fail to act in good faith if they exhibit unfair, deceptive, or unduly insensitive behaviours.

Below are some considerations that are taken into account when determining whether the employer has acted in bad faith:

• The level of unfairness must be accompanied by other concerns and is not enough alone to award compensation for bad faith damages. For example, it is the employee’s responsibility to prove the manner of dismissal posed mental distress beyond minor upset or hurt feelings that may be expected in the context of termination.
• Misrepresentation in the manner of dismissal also requires additional context, such as reputational consequences or an impact on the employee’s ability to find comparable work in the future.

To establish bad faith, an employee has the burden of proving that the employer engaged in unfair conduct upon dismissal and the employee suffered seriously, continued mental distress. The evidence does not necessarily need to include expert evidence but must establish that their distress goes beyond the regular distress expected in a termination.

EXAMPLES OF BAD FAITH CONDUCT BY AN EMPLOYER DURING TERMINATION

• Terminating an employee for the sake of convenience;
• Terminating in pursuit of retaliation;
• Making declarations that result in an attack on the employee’s reputation at the time of the dismissal;
• Misrepresenting the employee’s reason for leaving;
• Terminating an employee to deny them a pension benefit or other right such as permanent status.

WHAT IS THE REMEDY FOR BAD FAITH?

Damages awarded to an employee for a bad faith termination are intended to be compensatory rather than punitive in nature. This means the primary purpose of the compensation is to offset the employee’s losses rather than penalize the employer’s misconduct. The employee maintains the burden of providing sufficient evidence to prove the losses were caused by the manner of the termination.

CONTACT SULTAN LAWYERS FOR ADVICE ON BAD FAITH CONDUCT IN TERMINATIONS

If you believe your employer acted in bad faith at the time of your termination and are seeking legal advice concerning possible remedies, please contact the employment lawyers at Sultan Lawyers in Toronto at 416-214-5111 or here.