Recent employment law decisions by Canadian Courts mandate a return to basics when measuring damages for breach of employment contracts.
For many years, after Wallace v. United Grain Growers, Canadian courts struggled with the task of awarding damages to dismissed employees based on what might be regarded as egregious conduct at the time of or in the manner of dismissal. In that case, the Supreme Court of Canada directed that in a suitable case, where the employer’s conduct was sufficiently inappropriate, a trial court could award extra damages, but measured by reference to an increased notice period.
In Honda v. Keays, the Supreme Court of Canada has determined that this approach is not to be followed. Instead, applying Hadley v. Baxendale, the SCC has directed that if an employee suffers foreseeable loss or damage by reason of the inappropriate conduct of the employer, damages are to be assessed in the normal way – that is, without reference to any arbitrary notice period increase, and that the “injured” employee should receive full compensation for proven losses.
The implications of this new approach remain to be determined. Trial courts will need to decide what the new approach means, in the context of individual cases.