Bad Faith Discharges Revisited

We are pleased to tell you about two very significant decisions of national importance that were issued in the spring/summer of 2008 and which finally bring some good news for employers in the area of wrongful dismissal.

Background

In 1997, the Supreme Court of Canada (SCC) introduced the concept of "bad faith discharge" in Wallace v. United Grain Growers Ltd. In doing so, the SCC held that employers have a positive duty to treat an employee with good faith and fair dealing when terminating employment.

The SCC held that a breach of the employer's obligation of "good faith and fair dealing" should be compensated for by adding to the length of the notice period. For example, a terminated employee may have been entitled to a six-month notice period, but is awarded nine months due to the employer's bad faith. This increase in the notice period has come to be known as "Wallace damages."