Keays and Wallace Damages in Wrongful Dismissal

A significant question in wrongful dismissal law is the impact of the Supreme Court of Canada's decision in Keays on Wallace damages.

On the face of it Keays changes everything in terms of bad faith in wrongful dismissal.

The analysis in Keays (whether it decreases, or as some suggest, increase potential damages) is different in almost all respects from that in Wallace.

As a result, it is of great interest to see the analysis of the Court of Appeal dealing with Wallace damages not that Keays has been released.

Oddly, this week's Court of Appeal decision in Evangelista v. Number 7 Sales Limited, 2008 ONCA 599 deals with the Keays decision as if it did not change the law from Wallace.

The case rules:

Wallace Damages

[17] The appellant argues that the trial judge erred in awarding the respondent three months Wallace damages. In particular, the appellant takes issue with the trial judge's conclusion that there existed a "toxic work environment" when the appellant constructively dismissed the respondent.

[18] The trial judge carefully and thoroughly reviewed all of the circumstances surrounding the respondent's dismissal. He accepted the respondent's evidence and rejected the evidence of the appellant where it differed. He concluded that the appellant demonstrated palpable insensitivity in the manner in which it dealt with the respondent. The appellant was disingenuous and subjected the respondent to undue pressure at a time the respondent was in poor health. The respondent felt humiliated and let down by the conduct of the appellant. The trial judge's characterization of this environment as "toxic" was entirely reasonable.

[19] The trial judge's findings of fact supported an award of damages under the principles set out in Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701.

[20] After the argument of this appeal, the Supreme Court of Canada released its judgment in Honda Canada Inc. v. Keays, [2008] S.C.J. No. 40. Obviously, the trial and this appeal were not argued on the basis of the law as set out in Honda. That said, given the trial judge's strong findings of fact, I see no reason to interfere with the Wallace award.