Understanding Emotional Distress Damages in Wrongful Dismissal Cases: What Employees Need to Know
When an individual is wrongfully dismissed from their job, it is not just the financial implications that can be distressing. In some cases, employees may experience significant emotional suffering due to the manner in which their employment is terminated. While the idea of compensating for emotional distress in the context of wrongful dismissal may seem novel to some, courts have recognized this as a valid form of redress in certain situations. This Ontario employment law blog delves into the potential for emotional distress damages in wrongful dismissal cases, exploring how courts have handled these claims and what it means for employees seeking justice after an unfair termination.
Emotional Distress and Wrongful Dismissal: The Legal Perspective
Emotional distress, in legal terms, refers to the psychological impact suffered by an individual due to certain actions or circumstances. In the context of wrongful dismissal, emotional distress may arise when the manner of termination is especially harsh, unfair, or otherwise conducted in bad faith. It can include symptoms like anxiety, depression, confusion, anger, and insomnia—emotions that are not uncommon after an unjust dismissal but can significantly affect an individual’s well-being if done by an employer’s unnecessary conduct beyond simply terminating the employee’s job.
One of the key legal precedents related to this issue comes from the 2024 Ontario Court of Appeal case Krmpotic v Thunder Bay Electronics Limited (2024 ONCA 332). This case highlights how courts are increasingly recognizing that employees who suffer emotional distress due to wrongful termination may be entitled to damages, even if they cannot present medical evidence of a diagnosable psychological condition.
Types of Wrongful Dismissal Disputes creating a risk for employers of having to pay aggravated/moral damages (with the average amount being $25,000 under recent case law):
- Dishonesty as to the reason for termination
- Insensitive conduct during the termination process
- Failure to pay statutory entitlements
- Lack of clarity in the termination letter as to what are statutory entitlements v. the without prejudice offer
- Attempts to force an employee to resign
- Alleging cause for termination when no cause exists
- Termination in a fashion which causes humiliation
- Selecting timing of termination to intentionally deprive the employee of the vesting of some benefit, bonus or LTI entitlement
- Disseminating statements about the employee which will cause harm to professional reputation
- Termination immediately upon returning from a medical leave
- Failure to conduct workplace harassment investigation where the employee has complained of workplace harassment
- Failure to conduct a proper investigation prior to termination where the employee is being terminated as a result of misconduct or harassment
Case Overview: Krmpotic v Thunder Bay Electronics Limited
In this recent case, the plaintiff, Mr. Krmpotic, had worked as a Building Maintenance Supervisor for nearly 27 years before his employer terminated his employment. The dismissal occurred shortly after he returned from medical leave due to back surgery that had been necessitated by workplace injuries.
At the termination meeting, Mr. Krmpotic was offered a severance package of 16 months’ salary but was also asked to sign a Memorandum of Settlement and Release, which he refused. Subsequently, he pursued a wrongful dismissal claim, seeking a a better severance package.
Following his termination, Mr. Krmpotic experienced a range of emotional and physical distress, including anxiety, back and knee pain, confusion, frustration, and sleep disturbances. He even lost a job opportunity due to his inability to meet the physical demands of the role. Despite these claims, the initial trial judge dismissed his request for emotional distress damages, noting the lack of medical or psychological evidence to support his claim of a diagnosable psychological injury.
However, the Ontario Court of Appeal overturned this decision, affirming the lower court’s award of $50,000 in aggravated/moral damages. Importantly, the appellate court clarified that emotional distress damages could be awarded even in the absence of medical evidence, provided there was sufficient evidence that the employee’s distress went beyond the normal hurt feelings associated with being dismissed.
Key Findings from the Ontario Court of Appeal
In its ruling, the Ontario Court of Appeal emphasized that while normal emotional reactions to being dismissed—such as disappointment or sadness—are not compensable, aggravated/moral damages are warranted only when the employer’s conduct during the dismissal process is particularly egregious. This could involve actions like the employer being untruthful, misleading, or unduly insensitive, and the employee suffers damages as a consequence. If such conduct causes the employee harm beyond the usual distress, emotional distress damages may be awarded.
The Court of Appeal outlined a spectrum of mental distress caused by dismissal. At one end, there are employees who experience only normal distress and hurt feelings from losing their job, which is not compensable. At the other end, there are those who suffer from diagnosable psychological conditions, such as depression. Between these extremes, there are instances where employees experience significant emotional distress—like anxiety, frustration, and helplessness—that does not reach the level of a diagnosable condition but is still worthy of compensation.
For Mr. Krmpotic, the court found that his emotional distress, including anxiety, depression, poor sleep, and feelings of helplessness, were directly linked to how his employment had been terminated. These effects were considered more than the usual hurt feelings that might accompany a dismissal, justifying the award of aggravated/moral damages. In the court’s own words:
“In my view, on a full reading of his reasons, the trial judge approached the issue of mental distress in that fashion.The fact that Mr. Krmpotic had not established, through medical evidence, that he had suffered a diagnosable psychological injury, was not the end of a consideration of the issue of mental distress damages. As the trial judge correctly understood, he had to go further and determine whether (1) the appellants’ conduct, during the course of termination amounted to a breach of their duty of honest performance; and (2), if so, whether Mr. Krmpotic suffered harm – beyond the normal distress and hurt feelings arising from dismissal – as a result of that breach. The trial judge found in Mr. Krmpotic’s favour on both matters: the appellants had engaged in conduct that amounted to bad faith during the dismissal process; and Mr. Krmpotic suffered harm beyond the normal distress and hurt feelings that result from dismissal. These findings were fully open to the trial judge.”
Therefore, in this case, the employee was plagued by anxiety, depression, fear, poor sleep, frustration, and feelings of helplessness – all of which were harm going beyond the normal distress and hurt feelings resulting from the dismissal itself, which deserved an award for aggravated/moral damages even without providing medical evidence or expert evidence.
How Does This Case Impact Wrongful Dismissal Claims?
The Krmpotic case is significant in that it shows a growing acceptance of emotional distress claims in wrongful dismissal lawsuits, even when there is no medical diagnosis of psychological harm. This decision may signal a shift in how Canadian courts approach these types of cases, making it possible for employees to secure compensation for emotional suffering caused by unfair dismissal practices, without having to provide medical evidence or expert evidence (such as a psychiatrist’s testimony or opinion).
While this ruling applies in Ontario, its persuasive value may extend to other provinces, including Alberta. For employees seeking to pursue a similar claim, it is important to understand that while emotional distress damages can be awarded in the absence of a formal psychological diagnosis, having supporting evidence (such as testimonies from the employee or witnesses like family members) can strengthen the claim.
What Should Employees Do if They Experience Emotional Distress After Wrongful Termination?
If you have been wrongfully dismissed and are suffering emotional distress, it is advisable to consult with an experienced employment lawyer in Toronto or a wrongful dismissal lawyer. A lawyer specializing in wrongful dismissal can review your employment contract, assess the fairness of your termination, and help you understand your rights regarding emotional distress damages.
Here are some steps you can take if you believe your dismissal has caused emotional harm:
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Document Your Experience: Keep a record of your feelings and any symptoms of distress, such as anxiety, sleep disturbances, or physical discomfort. Notes from family members or friends who have witnessed your emotional state can also be useful.
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Seek Employment Lawyer Advice: Consult with an experienced employment lawyer to determine if your case qualifies for a wrongful dismissal claim. Your lawyer can help you evaluate the strength of your emotional distress claim and guide you through the legal process.
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Consider Medical Evidence: While medical evidence may not always be necessary, it can bolster your claim, especially if your distress is severe. Your lawyer can advise you on whether obtaining a psychological assessment is appropriate.
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Review Your Severance Package: Before accepting any severance package, it is essential to review your severance package with a severance package lawyer to ensure you are being treated fairly. A severance lawyer can help negotiate better terms and ensure that you are not being undervalued.
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Explore Constructive Dismissal: In some cases, employees may be subject to constructive dismissal, where their working conditions force them to resign. If this applies to your situation, a constructive dismissal lawyer can evaluate your case and advise you on your best course of action. However, this step should only be taken with the careful guidance of an experienced constructive dismissal lawyer, as it is very risky and can leave the employee without a job and, if unsuccessful, without any entitlement to receive financial compensation in the form of a severance package they could otherwise be entitled to if an employer wrongfully terminates their employment.
Conclusion
Emotional distress damages in wrongful dismissal cases are becoming more recognized in Ontario employment law, especially when an employer’s conduct during termination is particularly damaging to the employee’s emotional well-being. The Krmpotic case serves as an important reminder that employees who suffer significant emotional harm due to unfair treatment during dismissal may be entitled to compensation, even without medical evidence of a diagnosable condition.
If you are facing wrongful dismissal, it’s crucial to seek advice from a qualified wrongful dismissal lawyer who can help you navigate the complexities of employment law and ensure that your rights are protected. Whether you need assistance with reviewing your severance package, understanding constructive dismissal claims, or pursuing damages for emotional distress, a knowledgeable lawyer can be a valuable ally in achieving a fair resolution.
Always remember that each case is unique, and consulting with a legal professional is the best way to ensure your interests are effectively represented in the face of a wrongful termination.
For many employers, termination of employment is a difficult and confusing time, especially when it comes to drafting severance packages. Therefore, in a wrongful termination of employment, it is important for employers to consult with an experienced Ontario employment lawyer for a severance package review to understand the impact of wrongful dismissal on pension plans. If you are an employer or employee needing to speak with an experienced Ontario wrongful dismissal lawyer to discuss your options and next steps on how to deal with workplace issues, call Bune Law, employment law firm in Toronto. You will review and get guidance on your severance package before you agree to sign any termination documents, and help ensure that your severance package is fair and reasonable.