Wallace v. United Grain Growers – good faith, bad faith and extended notice periods

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The Supreme Court of Canada (SCC) has rendered numerous significant decisions that have shaped the country’s legal landscape.

One such case that played a pivotal role in reshaping Canadian employment law is Wallace v. United Grain Growers.

In this post, we will delve into the facts, the SCC’s ruling, and the lasting impact of this landmark case on employment law.

Background of the Case

Jack Wallace, an employee with a long and untarnished service record at United Grain Growers (UGG), was terminated without cause. The manner in which UGG carried out the dismissal, which included false allegations of financial impropriety, severely tarnished Wallace’s reputation, making it hard for him to secure comparable employment elsewhere. Wallace brought a lawsuit against UGG for wrongful dismissal.

The Supreme Court’s Ruling

The main issue the SCC had to address was not whether the dismissal was wrongful – it was already conceded that Wallace was dismissed without cause. The question was whether, and to what extent, the manner of dismissal should factor into the damages awarded.

The SCC in its 1997 judgment held the following:

1. Employer’s Duty of Good Faith: The court recognized that employers have a duty of good faith and fair dealing in the manner of dismissal. This means that employers shouldn’t engage in actions that are misleading, unduly insensitive, or untruthful during the termination process.
2. Bad Faith in Manner of Dismissal: If the employer breaches this duty of good faith during the dismissal, it can result in additional damages for the employee. These are not punitive damages, but rather recognition of the real prejudice an employee may suffer in the marketplace as a result of the manner of dismissal.
3. Extended Notice Period: Instead of introducing a new head of damages, the SCC incorporated damages for bad faith dismissal into the framework of the “notice period”. This means that if an employer acts in bad faith during the dismissal, the employee could be entitled to an extended notice period (and therefore increased damages).

Impact on Canadian Employment Law

The Wallace decision had profound consequences for employment law in Canada:

1. Heightened Employer Accountability: Employers are now held to a higher standard when dismissing employees. They must be cautious, transparent, and fair in their approach to avoid additional liability.
2. Holistic View of Dismissal: The decision pushed the courts to look beyond just the termination itself, considering also the manner in which the termination was carried out.
3. Focus on Employee’s Dignity: The decision underscored the importance of treating employees with respect and dignity during the termination process.
4. Influence on Subsequent Cases: Wallace set the stage for many subsequent cases where the manner of dismissal was scrutinized. Courts have frequently cited the principles from this case when awarding damages for wrongful dismissal.

In Conclusion

Wallace v. United Grain Growers remains a cornerstone of Canadian employment law, emphasizing the importance of good faith in the employer-employee relationship, especially during the dismissal process. The case reinforced the notion that employment is not just a simple contract but involves human dignity and the socio-economic aspects of a person’s life. The decision serves as a strong reminder for employers to act with care, honesty, and fairness when making the difficult decision to terminate an employee.