Employers’ Duty of Good Faith in the Manner of Dismissal

EMPLOYER’S DUTY OF GOOD FAITH IN THE MANNER OF DISMISSAL

Dismissal in Alberta

Employers in Alberta possess the right to dismiss an employee at any point, either with cause or without cause. When an employee is terminated without cause, the employer must provide that employee with appropriate notice or termination pay in lieu of notice. As a result, terminated employees will not financially suffer during the period it requires to find new work. Conversely, when an employee is terminated with cause, the employer maintains no obligation to provide the employee with notice or pay in lieu of notice. However, regardless of whether an employee has been terminated with cause or without cause, employers still have a duty to the employee being terminated.

 

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What is a terminating employer’s duty?

In a Supreme Court decision in the case of Wallace v United Grain Growers [1997] 3 SCR 701), it was established that involuntarily losing a job can be traumatic. Therefore, when terminating an employee, employers have an obligation of good faith and fair dealing at the time of dismissal to mitigate its negative effects. But what is considered good faith? In Wallace v United Grain Growers, the court went on to define good faith as being:

  •  candid and forthright;
  •  honest, truthful and not misleading;
  •  fair and reasonable; and,
  •  sensitive

 

The above criteria outline the manner in which employers must behave at the time of termination. If an employer fails to act in what is considered good faith as defined above, the terminated employee may have a claim in civil court on the basis of bad faith.

What is considered bad faith?

As discussed above, when an employer fails to act in good faith, it may be determined that the employer is acting in bad faith. Some examples of employer conduct that could result in bad faith damages are:

  • Hiring another employee as a replacement after they were told the terminated employee that they were being laid off due to a shortage of work;
  • Stating the employee was terminated because they could not properly do their job;
  • Falsely stating that the employee was terminated for cause;
  • Making allegations to others in the industry that the employee was terminated for dishonest conduct;
  • Inability and refusal to provide a letter of termination;
  • Termination of an employee immediately following return from disability leave; and,
  • The dismissal is intended to deprive the employee of a pension benefit or other rights such as permanent status

 

Often, the employer has made declarations that result in an attack on the employee’s reputation, or the employer misrepresents the reasons for dismissal. If you believe that an employer has terminated you in bad faith, you may be eligible for bad faith damages.

It is important to note that emotional upset resulting from the dismissal does not form the basis for compensation. If employers carry out the termination in a way that does not cause humiliation, embarrassment, or damage to one’s self-esteem and self-worth, then the employer is acting in good faith.

Bad Faith Awards

In the Supreme Court decision in the case of Honda v Kevin Keays, [2008] SCC 39, it was outlined how bad faith awards are now determined on a “moral damages” basis. Like other moral damages, bad faith damages are intended to be compensatory to the employee rather than punitive, meaning they are intended to compensate an employee for damages that he or she has suffered. Therefore, an award is granted if the employee can prove that the employer’s dismissal caused them damages as a result of mental or psychological distress. When this is established, bad faith damages can be evaluated and awarded.

Bad faith awards are considered and awarded separately from an award of notice. Thus, if you have been dismissed without cause and received adequate termination pay but your employer acted in bad faith, you may be eligible for bad faith awards in addition to your termination pay. Conversely, if you have been terminated with cause and as a result did not receive notice or pay in lieu of notice, you may still be eligible for a bad faith award if your employer failed to act in good faith during termination. It is very important to seek legal advice from an experienced employment lawyer if you believe you have been terminated in bad faith so that you can maximize the awards owed to you. The experienced employment lawyers at Osuji & Smith will be able to assist you with your inquiries in this regard.

The experienced employment lawyers at Osuji & Smith will be able to assist you with your inquiries in this regard.

In Alberta, employers maintain the right to terminate an employee at any point. However, when terminating an employee, an employer has an obligation to the said employee to act in good faith at the time of and after the dismissal. If an employer fails to act in good faith, the terminated employee may be eligible for damages on the basis of bad faith. Determining bad faith can be a confusing and difficult area of the law to navigate. If you believe you have been terminated in bad faith, contact Osuji & Smith Employment Lawyers to help you understand your rights under the law and take action where appropriate.

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