Recent caselaw suggests that huge damage awards for employees claiming wrongful dismissal is on the decline. Upper courts continue to cut down lower court awards and eliminate “bad faith”-types of compensation.


Last month, in Soost v Merill Lynch, the Alberta Court of Appeal reduced the lower court award to dismissed stock broker, Kurt Soost, from $2.2-million to $600,000. The Court held that while the employee was wrongfully dismissed by Merrill Lynch Canada, 12 months’ notice was a sufficient award for a high performing 3 year employee. It reversed the additional $1.6-million bad faith award the lower court had awarded for the loss of Soosts’ book of business as a result of the termination.


In Canada, if an employee is terminated with cause, the employee is entitled to no notice or pay in lieu of notice.  If, however, the employee is terminated without cause (or sues and a court sides with the employee), the employee is entitled to notice of termination or pay in lieu of termination.   Although there is no official rule of thumb, most agree the range of notice is between 3 to 5 weeks of notice per year of service – or a payment in lieu of such notice.  Courts have generally capped awards at around 12-15 months, but some have gone as high as 24 months.


In addition to the payment in lieu notice reflecting the number of years the employee has worked at a company, courts have inconsistently awarded additional awards for behaviour such as an employer’s bad faith in the termination, the employee’s mental suffering, and other losses suffered by the employee. 


Key to the analysis in Soost is whether the employer was acting in bad faith when terminating Mr. Soost.  Since the Supreme Court of Canada’s Keays v Honda Canada case in 2008, employee plaintiffs must prove that the employer’s conduct caused actual losses. The act of dismissal itself is not a sufficient “bad faith” or loss that warrants extra damages from the court. 


The trend over the last couple of years has been to limit the damages awarded to employees for wrongful dismissal.  While it remains impossible to predict exactly what a court would award, it appears that for most cases, the basic notice period requirements will be the extent of the damages.


For a good summary of the case and further commentary, you may want to visit the following sites: