In a post on June 19, 2010 ("Failure to adequately follow-up after fire destroyed employee's home, attack on reputation, lead to $20,000 bad faith damages"), I summarized the BC Supreme Court's decision in Beggs v. Westport Foods Ltd., 2010 BCSC 833.

In that decision, the trial judge awarded the employee $20,000 in damages for the manner of dismissal, and the employer's conduct thereafter.

The BC Court of Appeal rendered its decision on the appeal today (Beggs v. Westport Foods Ltd., 2011 BCCA 76). And while the appeal court upheld the trial judge's findings that the employee had been wrongfully dismissed and had not failed to mitigate her damages by refusing the employer's offer to return to work, it did overturn the trial judge's award of $20,000 in compensatory damages for the manner of dismissal.

Given that the test articulated by the Supreme Court of Canada in Honda Canada Inc. v. Keays, 2008 SCC 39, concerning when/on what basis damages will be awarded for the manner in dismissal is still relatively new, I will set out the appeal court's reasoning, its entirety, on this issue:

[48] Generally, an implied term of an employment contract is that an employer will act in good faith in the manner of dismissal. In Honda, Mr. Justice
Bastarache, writing for the majority, described how damages for mental distress for breach of an employment contract may be recoverable for the manner of an employee's dismissal if such damages were within the reasonable contemplation of the parties at the time the contract was made:

[58]...[Fidler v. Sun Life Assurance Co. of Canada, [2006] 2 S.C.R. 3, 2006 SCC 30] provides that "as long as the promise in relation to the state of mind is a part of the bargain in the reasonable contemplation of the contracting parties, mental distress damages arising from its breach are recoverable" (para. 48). In [Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701], the Court held employers "to an obligation of good faith and fair dealing in the manner of dismissal" (para. 95) and created the expectation that, in the course of dismissal, employers would be "candid, reasonable, honest and forthright with their employees" (para. 98). At least since that time, then, there has been expectation by both parties to the contract that employers will act in good faith in the manner of dismissal. Failure to do so can lead to foreseeable, compensable damages.

[49] Thus, if an employee can establish that he or she suffered mental distress that was caused by conduct in the manner of dismissal, which conduct is found to be "unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive", the employee may be able to recover compensatory
damages (Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701 at para. 98).

[50] Honda revisited the calculation of compensatory damages. It abandoned the extended notice period for compensatory damages that had been established in Wallace, and adopted an approach for compensatory damages based on actual damages fixed on the same principles as any award of "moral damages". Those principles include the principle of reasonable foreseeability, or what was in the contemplation of the parties when they entered into the contract, as was articulated in Hadley v. Baxendale (1854), 9 Ex. 341, 156 E.R. 145. Under the Hadley principle, damages for breach of contract are recoverable if they are "such as may fairly and reasonably be considered either arising naturally ... from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties" (at p.151, as cited in Honda at para. 54). As noted by Bastarache J., examples of conduct that could attract an award of compensable damages include, "attacking the employee's reputation by declarations made at the time of dismissal, misrepresentation regarding the reason for the decision, or dismissal meant to deprive the employee of a pension benefit or other right, permanent status for instance"(para. 59).

[51]  Compensatory damages for mental distress caused by conduct in dismissal are to be distinguished from the "ordinary psychological impact" of the dismissal or "[t]he normal distress and hurt feelings resulting from dismissal", which are not recoverable (Honda at para. 56).

[52] In this case, the trial judge relied only on the respondent's evidence to support a finding that the appellant had acted in bad faith in the manner of her "dismissal", and in granting the respondent compensatory damages. By
adopting a one-sided approach to the evidence, in my view the trial judge erred in her application of the Honda test for compensatory damages. The appellant's evidence, which the trial judge accepted, demonstrated that it was unaware of the respondent's reason for her continued absence from the workplace after the fire. It was only because of the respondent's lack of explanation for her absence that the ROE was issued indicating the respondent had quit. There is no evidence to support a finding that the appellant intentionally issued an incorrect ROE and therefore no evidence of bad faith or unfair dealings with the respondent. The trial judge's acceptance of the evidence of Mr. Ward and Mr. Book as "truthful and candid" can only mean that she accepted their assertions that they honestly believed the respondent had quit. In short,
both parties contributed to the unfortunate circumstances that ended the employment relationship.

[53] Furthermore, the medical evidence tendered by the respondent does not establish a link between the manner of her "dismissal" and the anxiety and depression she subsequently experienced. The evidence merely demonstrates a link between the respondent's mental distress (her anxiety and depression), and the loss of her home and job. As was noted in Honda, normal distress and hurt feelings over the loss of a job is not compensable.

[54] I see no evidentiary basis for an award of compensatory damages and would allow this ground of appeal.