Firing an employee can be a costly process for employers if not handled carefully. In a prior blog post found on our website here, we outline best practices for terminations. This post focuses on what employers should avoid and the potential consequences of mishandling a dismissal.

When an employee is terminated, they might be entitled to severance pay, and the way the dismissal is handled can lead to additional damages, including “aggravated” or “punitive” damages. (You can learn more about wrongful dismissal in our earlier post here.)

The Emotional Impact of Termination

Getting fired is a tough experience. Employees often face emotional distress, including damage to their self-esteem and sense of identity. Sometimes, the way an employee is dismissed can cause lasting psychological harm. If the dismissal is handled poorly, the employee might feel hurt and seek compensation for emotional distress, which is known as “aggravated damages”.

What Are Aggravated Damages?

Bad Faith Conduct: According to the Supreme Court of Canada in Wallace v. United Grain Growers Ltd. (1997), employers must treat employees with honesty, respect, and fairness during the termination process. Bad faith conduct includes being misleading, untruthful, or showing a lack of care for the employee’s feelings and vulnerability.

In another landmark case, Honda Canada Inc. v. Keays (2008), the Supreme Court ruled that if the employer’s bad conduct caused the employee real harm—whether physical or emotional—the employee could be entitled to aggravated damages. The amount awarded depends on how serious the employer’s misconduct was.

What Are Punitive Damages?

Punitive damages are awarded when an employer’s behaviour is particularly malicious, unfair, or vindictive. These damages are meant to punish the employer for their wrongful actions. However, punitive damages are rare and only granted in exceptional cases where the employer’s actions were egregious.

Recent Court Cases in British Columbia

Since Keays, there have been several cases in British Columbia where courts have awarded aggravated or punitive damages due to bad faith conduct. Here are some notable examples:

1. Zheng v China Southern Airlines (2023) – The employer accused the employee of leaking company documents and placed her on administrative leave before firing her. The employer also damaged her reputation with other potential employers. The court awarded the employee $208,832.75, including $35,000 in aggravated damages and $75,000 in punitive damages.
2. Valle Torres v Vancouver Native Health Society (2019) – After a long-time employee was fired, the employer falsely accused him of spreading rumours, which damaged his reputation and ability to find another job. The court awarded $30,000 in aggravated damages.
3. Hrynkiw v Central City Brewers & Distillers (2020) – A 56-year-old CFO was fired for alleged misconduct, including unauthorized bonuses and theft. The court found these claims baseless and awarded him 12 months’ severance pay, plus vacation and a share bonus.
4. Moffatt v Prospera Credit Union (2021) – An employee received a misleading termination letter that restricted her severance pay and extended her non-compete period. The court awarded punitive damages equivalent to 2.5 months of salary.
5. Bailey v Service Corporation International (Canada) (2018) – When an employee was fired while on medical leave, the court awarded $110,000 in punitive damages because the dismissal was handled improperly.
6. Ram v. The Michael Lacombe Group (2017) – The employer fired an employee for allegedly stealing food. However, it was revealed that the manager had given her permission to take the food. The court awarded the employee $25,000 in aggravated damages and 12 months’ salary, totalling $46,000.

Why It Matters

Terminating an employee is never easy, but it’s important that the process is handled professionally, with care and empathy. A respectful termination not only protects the dignity of the employee and is the right thing to do but it also helps maintain morale among the remaining staff and reduces the risk of costly damage awards.