An Update on Small Claims Court

Written on behalf of Peter McSherry

In a recent post, we reviewed the merits of suing an employer in Small Claims Court. The good news is that the monetary cap of Small Claims Court is set to increase from the present level of $25,000 to $35,000 as of January 1, 2020. If you are considering bringing an employment action in Small Claims and believe your case is more in the range of $35,000 or even slightly more, you would be best advised to wait until January to commence your case.

Evolution of Good Faith in Employment Litigation

If there is one thing to remember, particularly in employment law, is that the law changes frequently. This applies not only to statutes governing employment law issues, but also judges’ decisions, which is referred to as the “common law”.

Lawyers must keep up to date and always be on top of changes in the law.

A very good example of this is what is referred to as the “good faith” obligation of the employer on termination of employment.

Wallace Damages

The Supreme Court of Canada set new law on this issue in 1997 in Wallace v. United Grain Growers Ltd.. In this action for wrongful dismissal, the Court ruled that the employer must treat employees fairly on termination. In this case, the employer had argued “just cause” to terminate the employee and kept this argument going until the date of trial. Suddenly, just before the trial began, the company withdrew its defence.

The Court noted that this conduct could have two effects on the employee. It could cause emotional distress and also, importantly for this post, have a prejudicial impact on the employee’s job search efforts.

To compensate for the emotional distress issue, the Court ordered an increase to the normal notice period.

SCC Adds Mental Distress as a Component of Bad Faith in Termination

Another landmark decision by the Supreme Court, Honda Canada Inc. v. Keays, followed many years later in 2008. This case dealt with an employee who was unable to work due to a medical issue and the manner in which he was treated on termination. The Court examined the mental distress issue and determined that it made no sense to compensate for this aspect of the termination by increasing the notice period. Instead, the Court ordered an award of compensation for emotional distress. This decision gave rise to “aggravated damages” for unfair conduct at the time of termination.

A New Decision Expands the Scope of Aggravated Damages

Honda did not consider the impact of the unfair conduct on the employee’s job search, as in that instance the claimant was medically unable to seek additional work. Recently a new decision did just that. In this decision, the employer, The City of Toronto, had unfairly alleged theft on the part of the employee. The employee was a long-term staff member at a city-run shelter for homeless men, and the City alleged he had stolen a total of $5,000 from a number of residents. The residents of the shelter were expected to pay a monthly maintenance fee instead of rent, which was generally paid in cash. The City alleged that the employee had, on a number of occasions, pocketed the case rather than properly accounting for it. However, after a review of the evidence, the Court found that there was insufficient reason to terminate the employee for cause and that the employer’s unfair conduct adversely affected the employee’s search for new employment. The Court allowed a special damages award to the employee. This sum was set at $50,000, related to the impact on the job search. The aggravated damage sum was set at $15,000. These sums were both in addition to the severance of 18 months.

Take Away for Employees

The evolution of these legal issues is a striking example of the need to stay current, as the law around employment and termination can change over time. The law is always adapting and changing. Ironically, there is further law that will arguably require a good faith obligation on employers throughout the employment relationship, not just on termination, but this is another story.

Get Advice and Know Your Rights

Stay up to date and understand your legal rights. Contact the offices of Guelph employment lawyer Peter McSherry. We can guide you through the issues, help you understand your rights, and defend your position. Contact us online or by phone at 519-821-5465 to schedule a consultation.