Earlier this year, the BC Supreme Court (in Thompson v. Revolution Resource Recovery Inc. 2025 BCSC 8, “Thompson”) addressed the issues of aggravated and punitive damages in wrongful dismissal cases. Briefly, the court awarded $25,000 punitive damages due to the employer’s reprehensible conduct by wrongfully withholding pay, including statutory mandated pay in lieu of notice of termination, then by making provision of that pay, and already earned commissions, contingent on the plaintiff signing a release of all claims.
Aggravated damages are compensatory; their purpose is to compensate the aggrieved person for any losses suffered due to the complained of conduct – typically mental distress. However, they also serve objectives of retribution, deterrence and denunciation. Aggravated damages are available in wrongful dismissal cases when the manner of dismissal was in bad faith or included unfair dealing in the course of dismissal, and are meant to compensate for injuries such as humiliation, embarrassment and damage to one's sense of self-worth and self-esteem. Aggravated damages do not require an independent actionable wrong.
Punitive damages are not compensatory, they are punitive. They are exceptional. The purposes ofpunitive damages are retribution, deterrence and denunciation. They are available when the defendant commits an actionable wrong, including failing to meet implied obligations of good faith and fair dealing in the manner of dismissal. Examples include fabricating allegations of serious misconduct or incompetence to support dismissal, playing hardball, or implementing the dismissal in a manner designed to disparage the employee’s capabilities or honesty in the eyes of other employees or future employers. The test has been described as “highly reprehensible misconduct that departs to a marked degree from ordinary standards of decent behaviour.”
The Thompson case is a relatively recent reminder that employers should always act in good faith when dismissing employees. Examples of conduct which could be considered not acting in good faith or fair
dealing include: wrongfully withholding statutory minimum pay in lieu of notice, or owed and already earned wages; maliciously fabricating false just cause allegations; engaging in hardball negotiations to intimate a former employee to settling or abandoning their wrongful dismissal claim; or, implementing the dismissal in a way to disparage the former employee’s ability, honesty, or integrity.
Historically, following a Supreme Court of Canada decision, Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701, the reasonable notice period for termination without cause could be extended when employers failed to act in good faith and fair dealing in their manner of dismissing an employee. However, in Honda Canada Inc. v. Keays 2008 SCC 39, the Supreme Court of Canada revisited the manner of assessment of
damages for bad faith manner of dismissal (often referred to as Wallace damages), and held aggravated damages were more appropriate than extended the reasonable notice period.
In addition to claims for aggravated damages (which were ultimately dropped at trial), in Thompson the former employee, Ms. Thompson, sought punitive damages. She sought punitive damages for two reasons: first, because the employer sent the employee a Cease and Desist Letter alleging breaches of restrictive covenants including a non-disclosure agreement; and second, because the employer withheld earnings,
including statutorily mandated minimum pay in lieu of notice, and ultimately only providing the cheque on condition that the employee release the employer of all claims arising from the termination.
The Ceaseand Desist Letter arose because Ms. Thompson had kept a Sales/Retention Activity Summary Chart which set out her calculations with respect to contracts signed and re-signed by her in each year of her employment. The Court ultimately found while Ms. Thompson hadn’t breached any non-disclosure
agreement or restrictive covenant. However, the court also accepted the letter was not high-handed nor reprehensible, because the way the Chart was structured appeared to have been based off confidential information. While the Court didn’t expressly say the conduct was in good faith, the implication was the conduct was at a minimum rational rather than malicious.
The amount of the withheld earnings ultimately paid under condition was just under $8,000 and consisted of both owed commissions and pay in lieu of notice of termination. At trial Ms. Thompson argued “she was financially and emotionally vulnerable, and that [the employer] acted in a manipulative and reprehensible
manner in… providing her the Cheque subject to its unilaterally imposed condition that signing it would release Revolution from all claims.” The court found the manner the employer treated the owed wages and statutorily mandated minimum pay in lieu of notice justified punitive damages and awarded the plaintiff a further $25,000 for punitive damages. In doing so, the court explored the difference between aggravated damages and punitive damages.
The court noted punitive damages were exceptional and had the object of deterring future conduct by the employer. The court further described the standard for punitive damages Justice Fenlon (then of the BC
Supreme Court, now a BC Court of Appeal judge) in Kelly v. Norsemont Mining Inc., 2013 BCSC 147, as follows,
[114] The conduct complained of must be an actionable wrong. The actionable wrong does not need to be an independent tort: it can be found in a breach of a distinct and separate contractual provision, or in another duty such as a fiduciary obligation: Whiten v. Pilot Insurance Co., 2002 SCC 18 at para. 82, [2002] 1 S.C.R. 595. The requirement of an actionable wrong may be satisfied where the employer fails to meet his or her implied obligations of good faith and fair dealing in the manner of dismissal: Nishina v. Azuma Foods (Canada) Co., 2010 BCSC 502 at paras. 260-64.
[115] Examples of conduct justifying punitive damages include the employer knowingly fabricating allegations of serious misconduct or incompetence against an employee to support dismissal; the employer utilizing “hardball” tactics to intimidate the employee into withdrawing or settling his or her wrongful dismissal suit; or the employer implementing the dismissal in a manner designed to disparage the
employee’s capabilities or honesty in the eyes of other employees or future employers: Geoffrey England et al, Employment Law in Canada, 4thed., (Markham, Ontario: LexisNexis Canada Inc.), ch. 16 at 138-39.
The Court in Thompson continued,
[120] As noted in Kelly, the requirement of an actionable wrong may be satisfied where the employer fails to meet its implied obligations of good faith and fair dealing in the manner of dismissal: Nishina v. Azuma Foods (Canada) Co. Ltd., 2010BCSC 502 at paras. 260-264. In this case, Revolution first staked out its position regarding the cashing of the Cheque in its Termination Notice and then maintained it through communications exchanged regarding the notice she was owed. I am satisfied that it breached its obligation of good faith and fair dealing in the manner of dismissal thereby.
[121] I am satisfied that Revolution’s conduct in this respect can fairly be labelled reprehensible. Employers should clearly be deterred from leveraging their own non-compliance with employment standards requirements to compel financially vulnerable employees to compromise their legal positions.
[122] The amount of punitive damages awarded must be proportionate to other damages granted and appropriate to meet the objectives of denunciation and deterrence. The case law relied upon by Ms. Thompson in seeking an award include: Kelly; Fobert v. MCRCI Medicinal Cannabis Resource Center Inc., 2020 BCSC 2043; Moffat v. Prospera Credit Union, 2021 BCSC 2463; Altman v. Steve’s Music, 2011 ONSC 1480.
The court awarded Ms. Thompson $25,000 punitive damages, half of the $50,000 claimed. By comparison, she was awarded just under $32,000 for pay in lieu of reasonable notice. Punitive damages are not taxable, pay in lieu of reasonable notice is. As such, after taxes, the punitive damages basically doubled Ms. Thompson’s award.
Interestingly, in this particular case, it does not appear special costs were sought. Special costs can be awarded if a party’s conduct in the proceeding is scandalous, reprehensible, or otherwise deserving of rebuke. Special costs are typically close to the other side’s legal bill, rather than the usual party-party costs
which are based on a schedule of costs which only partially compensates a successful party for the legal bills. Employers should note a malicious and unfounded allegation of dishonesty (which was not made in this case) could well result in an award of special costs as well.
In summary, the Thompson case describes two different heads of damages available to employees when their employers do not act in good faith in the manner of dismissal. Aggravated damages remain the way Wallace damages are assessed. Aggravated damages do not require an independently actionable wrong, and are available when an employee suffers injuries such as humiliation, embarrassment and damage to one's sense of self-worth and self-esteem, while punitive damages require a highly reprehensible, independently actionable wrong but do not require the employee to suffer injuries such as humiliation, embarrassment and damage to one's sense of self-worth and self-esteem.
PS: Ms. Thompson also sought damages for pay in lieu of reasonable notice and for unpaid bonuses. The employer alleged the plaintiff failed to mitigate her damages. Ms. Thompson was a sales manager, who had been with her employer for three years and four months, and who was 56 at the time of termination. The court held she was entitled to six months notice. However, the court also found the plaintiff had fell “somewhat short in her mitigation efforts” by not diligently exploring a possible alternate position and reduced the notice period by one month (without explanation or analysis as to why the reduction was for just a month). The claim for unpaid bonuses arose from a difference of opinion on how bonuses should have been calculated and was dismissed at least in part because Ms. Thompson had acquiesced to the employer’s method of calculation during her employment.