We always caution our clients that employment law is constantly changing. Just when you think the law on an issue is settled, a decision comes along that turns back the clock. That is exactly what happened in the recent Ontario Superior Court decision Wilsher v. Olympic Wholesale (“Wilsher”)1.
Background
The plaintiff was a 55-year-old night shift supervisor who was abruptly fired for just cause after 17 years of service. The employer alleged that the plaintiff committed fraud and time theft by editing timesheets to “top up” his subordinates’ hours. However, the court firmly rejected the employer’s allegations and found there was no just cause for dismissal.
The evidence demonstrated that the “topping up” of hours was actually a longstanding practice used by several supervisors to ensure unionized employees received the weekly hours guaranteed by their contract. The court also highlighted that the plaintiff did not personally benefit from this practice.
Since the employer failed to establish that it had just cause, the plaintiff was wrongfully dismissed and was therefore entitled to reasonable notice.
The Notice Award
The court determined that the plaintiff was entitled to 33 months of common law reasonable notice. This was broken down as:
- 19 months of reasonable notice, plus
- an additional 14 months on account of the employer’s bad faith conduct.
A Blast from the Past
Prior to dismissing an employee for just cause, it is highly advisable to investigate the misconduct before implementing the dismissal to make sure that the proverbial punishment fits the crime. Notably, when an employer investigates suspected misconduct, it must do so fairly and objectively; an investigation is not a prosecution. The employer in Wilsher did not get the memo.
The court correctly determined that the employer acted in bad faith in the course of dismissal by conducting a targeted investigation, holding an interrogation-style meeting without notice or due process, then baselessly accusing the plaintiff of fraud and time theft in the termination letter. Afterwards, the employer issued a Record of Employment which interfered with the plaintiff’s employment Insurance benefits.
Surprisingly, the court then compensated the plaintiff by awarding him “Wallace damages”, which extend an employee’s notice period if there is bad faith.
This is noteworthy because it departs from the widely adopted Supreme Court of Canada’s 2008 decision in Honda Canada Inc. v. Keays (“Keays”)2. Keays established that mental distress arising from a termination of employment that goes beyond the typical distress associated with losing one’s job should be compensated by way of aggravated, moral or punitive damages, and not by an “arbitrary” extension of the notice period. In other words, when there is bad faith, courts should not compensate the employee by extending the notice period, but by awarding a separate amount of damages, in addition to pay in lieu of notice. Since these additional bad faith damages are not considered income, they are non-taxable, which is an important difference.
Instead of following the established approach, the court in Wilsher relied on older jurisprudence, including the Supreme Court of Canada’s earlier decisions in McKinley v. BC Tel3 and Wallace v. United Grain Growers Ltd.4 (the source of the famous Wallace damages). Relying on these older cases, the court concluded that “[w]here a dismissal is accompanied by bad faith or unfair dealing on the part of the employer… such conduct merits compensation by way of an extended notice period”.
Curiously, the court did not comment on why it departed from the recent and established approach set out in Keays, which is a cornerstone of employment law and not an obscure precedent. Furthermore, the court declined to award moral, aggravated, or punitive damages, opting only to lengthen the notice period.
As Wilsher reminds us, employment law is constantly changing. That said, we thought we were long past the days where bad faith would result in an extension of the notice period. To be frank, Wilsher is a poor decision with respect to how damages for bad faith are assessed. We expect this decision will be appealed as it does not assess damages in line with current case law.
The Upshot
Despite the issues with how bad faith damages were assessed, Wilsher serves as a stark reminder of the high costs employers face when they allege just cause without a reasonable basis to do so, and of the potential losses employees face when they do not challenge spurious allegations of cause.
If you’re an employer, we can assist you with conducting proper investigations into suspected misconduct, assessing the strength of just cause allegations, and advise you on the appropriate next steps.
If you’re an employee, we can review your termination to ensure you receive your legal entitlements, and assess whether your employer’s conduct warrants additional damages for bad faith.
As we always say: if you think you need an employment lawyer, you probably do!
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Endnotes
- Wilsher v. Olympic Wholesale, 2026 ONSC 3620 (CanLII), <https://canlii.ca/t/kls5v>
- Honda Canada Inc. v. Keays, 2008 SCC 39 (CanLII), [2008] 2 SCR 362, <https://canlii.ca/t/1z469>
- McKinley v. BC Tel, 2001 SCC 38 (CanLII), [2001] 2 SCR 161, <https://canlii.ca/t/521q>
- Wallace v. United Grain Growers Ltd., 1997 CanLII 332 (SCC), [1997] 3 SCR 701, <https://canlii.ca/t/1fqxh>
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