A workplace safety tribunal has ruled that an employee’s claims for mental distress damages arising from the manner of her termination are not barred by workers’ compensation legislation, allowing her civil action to proceed in full against her former employer.
In a decision clarifying the interplay between wrongful dismissal claims and workplace injury compensation, the Workplace Safety and Insurance Appeals Tribunal (WSIAT) denied an application from Chair Source and its president, R.M., who had sought to block portions of a wrongful dismissal lawsuit filed by their former marketing manager, L.T.
The defendants had argued that L.T.’s claims for intentional infliction of mental distress and related aggravated and punitive damages should be barred under section 31 of the Workplace Safety and Insurance Act (WSIA), claiming these damages were actually disguised workplace injury claims that should be processed through the workers’ compensation system.
The termination incident
L.T. had worked for Chair Source, a retail store selling chairs, stools and tables, for approximately 17 years. According to her Statement of Claim, on February 6, 2018, she approached R.M. to inquire about showroom items marked as complete but weren’t present. After being unable to locate the items, R.M. allegedly changed the subject, became aggressive, grabbed purchase orders from L.T., and began “screaming profanities” at her.
When L.T. asked if she was being terminated, she claims R.M. “continued to scream profanities and indicated that he was terminating her employment.” The Statement of Claim indicates she was “so upset and frightened” that she immediately collected her belongings and left.
L.T. later received a box containing items from her desk, a termination letter, record of employment, and a cheque for termination and vacation pay equivalent to 16 weeks’ notice. She alleges this amount was insufficient given her lengthy service.
Mental distress claims
In her civil action, L.T. seeks damages for wrongful dismissal along with several claims related to mental distress, including:
- $50,000 in aggravated damages for the “egregious manner” of termination
- $50,000 for intentional infliction of mental distress
- $50,000 in punitive damages
The Statement of Claim alleges she “suffered from extreme anxiety, depression, insomnia, humiliation, mental distress, frustration and the attrition of her self-esteem and confidence” and that her “normal enjoyment of familial and personal relationships are severely impaired.”
The WSIA bar issue
The core legal question was whether these mental distress claims constitute disguised workplace injury claims that should be barred under the WSIA, which generally prohibits workers from suing employers for work-related injuries in exchange for no-fault insurance benefits.
Chair Source argued that if the alleged harassment and violence were proven, L.T. would be eligible for benefits under the WSIA, thus removing her right to civil action for the same injuries.
L.T.’s position was that her mental distress claims were limited to injuries resulting from the manner of termination, and the WSIA specifically excludes mental stress injuries arising from termination decisions from compensation eligibility.
The tribunal’s reasoning
The vice-chair emphasized that while wrongful dismissal actions based on breach of employment contract are not barred by the WSIA, it’s “the substance of the action and not the manner in which the action is framed, that is determinative.”
Analyzing the facts, the tribunal noted that L.T.’s claim was fundamentally different from cases involving constructive dismissal based on a series of allegedly harassing incidents over time. This case involved a discrete termination event where separating pre-termination harassment from the actual dismissal would be impractical.
The tribunal found that “the activities of the parties that occurred on February 6, 2018 are…to be regarded in these circumstances as continuous. The activities are not practically capable of being divided into incidents that occurred in the course of employment…and incidents related to the circumstances of the plaintiff’s claimed wrongful dismissal.”
Critical to the decision was section 13(5) of the WSIA, which states: “A worker is not entitled to benefits for mental stress caused by decisions or actions of the worker’s employer relating to the worker’s employment, including a decision to change the work to be performed or the working conditions, to discipline the worker or to terminate the employment.”
The tribunal concluded: “The lack of entitlement to benefits for mental stress caused by a termination is significant in terms of a worker’s right to sue…because removal of the right to sue is based upon eligibility to benefits under the WSIA.”
Access to justice concerns
The tribunal also expressed concern that forcing L.T. to pursue her claim in two different forums for what was essentially “one continuous sequence of events” would create barriers to her ability to seek a remedy.
“The plaintiff is entitled to have a forum in which to attempt to seek a remedy for the damages she claims and not to have her efforts to seek redress for her loss be frustrated by being forced to proceed in two different forums,” the vice-chair wrote.
Ruling
The tribunal denied the application, ruling that “the plaintiff’s Statement of Claim is in its entirety a claim in respect of her assertion that she was wrongfully dismissed and is not a disguised tort action in respect of an injury sustained in the course of her employment.”
This decision allows L.T.’s civil action to proceed in full, including all claims related to mental distress allegedly arising from the manner of her termination.
For more information, see Decision No. 86/25, 2025 ONWSIAT 170 (CanLII).
