Wrongful Dismissal – Limits on Compensation for Fired Employees

Most people are familiar with what lawyers call "wrongful dismissal."  For many people, however, when they hear the expression "wrongful dismissal," they think that it means that employers do not have the right to dismiss an employee.  This belief is wrong - in fact, employers are entitled to fire employees – even “good” employees?

What is it then that makes a dismissal “wrongful”?  A dismissal is wrongful when the employee is fired without cause or, alternatively, adequate advance notice.

When the courts hear a wrongful dismissal case, the first question which they must face is, of course:  was the dismissal in fact wrongful?  Next, however, they must decide on how to compensate the former employee.  In most cases, that question involves an analysis of the length of the advance notice which the employee should have received.  In other words, if the employee should have received one year’s notice in advance of dismissal, then his or her compensation should be equal to one year’s salary.  There have also been cases where the manner in which the dismissal was carried out was particularly offensive.  In those cases, the court has awarded additional compensation - often by adding extra months to the notice period.

In the recent Alberta case of Merrill Lynch Canada Inc. v. Soost [2010 ABCA 251], the Alberta Court of Appeal was asked to review a lower court decision which had awarded Mr. Soost an additional $1.6 million on the basis that the dismissal itself had been harmful to Mr. Soost’s reputation.  Unfortunately for Mr. Soost, the Court of Appeal overturned that part of the lower court’s award.  The Court of Appeal’s decision is easy to understand when one remembers that, as mentioned above, an employer is entitled to fire an employee.

When things go badly for employers, employees are often the victims.  The law of wrongful dismissal provides some protection for employees but there are limits.

Article provided by Centennial Law Corp.