Damages

Most indefinite-term employees who are fired without just cause are entitled to reasonable notice of the termination or pay in lieu of notice as determined by the common law. Usually, this type of case can be settled. When it can't however, the employee is entitled to commence a lawsuit for damages for wrongful dismissal. Most people assume that damages consist only of the employee's salary during the notice period. There is however, a myriad of other types of damages available. Let's examine a few of the more usual types of damages potentially available in a wrongful dismissal action.

For employees who earn commission income, the courts must determine what future commissions which might have been earned during the notice period, if any. To do this, the court will review previous earnings and often will look at commission earnings during the same months in which the notice period falls. At other times, the court will take an average of the commission income and award that during the notice period. If the employer's revenue drops through the notice period, the presumption is that commission income might also have been less. In some cases, if an employer does not diligently pursue an opportunity, which would have garnered commission income to the employee through the notice period, the court may award commission income that is presumed to have been earned.

Loss of fringe benefits such as medical, dental and health benefits do have value, according to case law. The Ontario Court of Appeal has held that the dismissed employee is entitled to the value of lost benefits flowing from the dismissal. The pecuniary (monetary) value of those benefits has been determined based on the employer's contribution to maintaining those benefits.

Bonuses, profit sharing and stock options are treated much like medical benefits provided they are integral to the employee's remuneration. For example, a non-discretionary bonus that has become part of the employee's income is usually awarded through the notice period. To determine the amount of the bonus to be paid through the notice period, the court will consider whether the employer would have paid the employee had he/she worked throughout the notice period. If the employer paid bonuses to other employees during the notice period, courts have generally awarded it to the dismissed employee. Some cases have said it is unconscionable for an employer to deny a bonus to an employee during the fiscal year for the reason that the employee was not in active service when the bonus was paid out. Courts have held that it is suitable to pro-rate a bonus over the notice period. If an employee is deprived of exercising a stock option he/she would have had, had reasonable notice been provided, the court will assess and award damages based on the loss of opportunity.

Sometimes an employee is scheduled for a pay raise but the employer fails to pay it because it falls during the notice period. The cases have been quite clear that employers are liable for pay increases that are set to occur during the notice period provided the increases were part of the employment contract. Where a salary increase was negotiable or discretionary, it is usually not awarded during the notice period.

With respect to a company car, the courts treat it differently depending on the circumstances. For example, a taxable car allowance that is considered as income, is generally awarded during the notice period. If the employee is given a car to use during employment, the courts have awarded the value of the personal use of the car including any related expenses paid by the employer. If a car allowance was used strictly for business use of the car, the value of that is not awarded during the notice period since no loss has occurred during that time.

Housing benefits and real estate losses can sometimes be recovered during the notice period. Mortgage subsidies that would have been paid had the employee worked throughout the notice period have been awarded as part of pay in lieu of notice. In one case, an employer was required to pay the employee losses on the sale of his property, sales commissions, carrying costs and interest when the employee was required to move to a different city to continue working and then once he moved, was dismissed. The key to this kind of recovery however, is whether the losses were reasonably foreseeable as flowing from the breach of the employment contract. A few cases have allowed moving costs so that new employment could be commenced.

Damages for loss of reputation and compromise of competitive position will usually only be awarded where the dismissal itself was done in such a manner as to cause the employee harm in the workplace. There is some traditional case law that prevents recovery under this head of damage but it is not impossible.

I have provided a summary of the few more popular heads of damages obtainable in a wrongful dismissal action. There are certainly other types of damages available that space does not permit examining.

If you have been fired and need a severance package reviewed or a lawsuit commenced, please call me at 905-845-0767 to discuss your situation.

The above is not legal advice and should not be relied upon. You should consult a lawyer to have your specific situation analyzed.