Supreme Court of Canada rules on wrongful termination damages

Date Closed

October 09, 2020

Lead Office

Toronto

On October 9, 2020, the Supreme Court of Canada released its judgment in Matthews v. Ocean Nutrition Canada Limited. McCarthy Tétrault LLP represented the Canadian Association of Counsel to Employers (“CACE”) as an intervener before the Court. 

The Court ruled that an employee who has been wrongfully terminated should receive damages that reflect any bonuses or payouts to which they would have been entitled during the reasonable notice period, unless an agreement between the employee and the employer is “absolutely clear and unambiguous” to the contrary. Here, since Matthews would have received a payment under his employer’s long-term incentive plan (“LTIP”) during the reasonable notice period, he was entitled to damages that reflected that payment at common law, and there was no sufficiently clear and unambiguous agreement to take away or limit that common law right.

With respect to the organizing principle of good faith in contract, and its application to employment contracts, the Court affirmed that, “[s]o long as damages are appropriately made out and causation established, a breach of a duty of good faith could certainly give rise to distinct damages … , including damages for mental distress” and, “in certain circumstances”, punitive damages. Here, however, Matthews did not seek damages for mental distress and did not press his claim for punitive damages on appeal. The only damages he sought for the employer’s alleged bad faith were in the amount of the LTIP payment to which he was otherwise entitled under the employer’s duty of reasonable notice. The Court therefore declined to decide whether the employer had breached a duty of good faith to Matthews. It did, however, leave the door open for future recognition of a “broader duty [of good faith] during the life of the employment contract”.

CACE is an organization that represents approximately 1,500 management-side labour and employment lawyers in Canada. On judicial cases of significance, CACE will intervene provided that the case involves a labour and/or employment component.

McCarthy Tétrault LLP represented CACE as an intervener in the Supreme Court of Canada, with a team led by Tim Lawson that included Brandon Kain, Adam Goldenberg and Bruna Kalinoski.

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