When a condominium corporation is faced with defending a wrongful dismissal claim, it is not unusual to find a claim for "Wallace Damages". But what are they? And how can it affect your condominium corporation?

The short answer is that a condominium corporation's conduct, as the employer, during the course of dismissing an employee can and will attract additional damages. This was the result of the 1997 landmard Supreme Court of Canada decision, Wallace v. United Grain Growers Ltd.

The facts, although unfortunate, were simple enough: Jack Wallace worked for Public Press, a subsidiary of United Grain Growers Ltd. ("UGG"), for 14 years. He was their top sales person each of the 14 years he was employed. Prior to his 59th birthday, Mr. Wallace was summarily discharged without any explanation. In fact, he had been complimented on his work just days prior to his dismissal. The dismissal had significant adverse effects on Mr. Wallace. He had difficulty finding alternate employment; he suffered emotional difficulties and made a voluntary assignment into bankruptcy. Mr. Wallace brought a claim for wrongful dismissal against UGG. As part of its defence, UGG alleged that it had just cause to dismiss Mr. Wallace. UGG held this position for nearly two years until just prior to trial.

Q Mr. Wallace succeeded at trial and was awarded damages in the amount of 24 months' notice, in addition to aggravated damages in the amount of $15,000.00. The Manitoba Court of Appeal reversed this decision and reduced the notice period to 15 months and eliminated the aggravated damages altogether.

Mr. Wallace successfully appealed to the Supreme Court of Canada where he was awarded damages in the amount of 24 months' notice as a result of the bad faith manner in which UGG dismissed him. In this groundbreaking decision, the Supreme Court held:

[W]here an employee can establish that an employer engaged in bad faith conduct or unfair dealing in the course of the dismissal, injuries such as humiliation, embarrassment and damage to one's self-worth and self- esteem might all be worthy of compensation depending upon the circumstances of the case. In these situations, compensation does not flow from the fact of dismissal itself, but rather from the manner in which the dismissal was effected by the employer.

Since the Wallace decision, the list of "Wallace factors" [factors demonstrating bad faith] continues to grow as courts across the country have followed its lead and have extended the notice period to which an employee is entitled in circumstances that demonstrate bad faith conduct on the part of employers. These include, but are certainly not limited to:

1. When an employer makes unfounded allegations that it had just cause to terminate an employee and later withdraws these allegations;
2. When an employer alleges that it had just cause to terminate an employee without first conducting a proper investigation to substantiate these allegations and/or providing the employee with an opportunity to respond;
3. When an employer terminates an employee in a manner that causes embarrassment, humiliation, damage to the employee's sense of self-worth and self-esteem, i.e., when an employee is abruptly escorted off the premises in front of other employees in circumstances that do not warrant such conduct;
4. When an employer terminates an employee after promising the employee job security and discouraging the employee from seeking alternate employment; and
5. When an employer terminates an employee following the employee's return from sick or disability leave when the employee is vulnerable and has suffered from medical problems and/or terminating an employee while the employee is off on sick or disability leave.

An employer's duty to act in good faith towards an employee continues even after the employee has been terminated. Examples of instances in which courts have found the conduct of employers to constitute "bad faith" post-termination include, but are not limited, to the following:

1. When an employer threatens a former employee during the course of litigation, i.e., to accept the employer's offer to settle;
2. When an employer discredits the employee to others and/or makes negative public statements about the former employee, i.e., by making false allegations of improper conduct on the part of the employee without any justification;
3. When an employer continues to maintain unfounded allegations of just cause for dismissal and later abandons the allegations immediately prior to trial;
4. When an employer withholds payments to which a former employee is entitled, i.e., unpaid commissions; and
5. When an employer promises to provide a letter of reference but then fails to do so.

CONDOMINIUM CORPORATIONS BEWARE!
* Do not allege cause without first doing your homework! Document your concerns and provide the employee a chance to respond.
* If you erroneously allege cause, you should withdraw this allegation as soon as possible rather than waiting until trial.
* Do not make statements to others about an employee's misconduct unless you have substantiated proof.
* Be reasonably sensitive to employees while away on sick/disability leave. Do not pester them while they are away or upon their initial return and do not threaten an employee to return prematurely.
* Treat all employees with courtesy and respect when you are dismissing them, regardless of how you may feel about them!
* After dismissing an employee, do not hold back payments that are legally due or allow unnecessary delays in the processing of a former employee's records.

When dismissing an employee it is critical for employers not to act in bad faith. Rather, a condominium corporation must be conscious of its conduct (through its board of directors or property management) and the effect it can and will have upon the employee. While there is no exact definition of what constitutes bad faith, above are some factors that courts have used in awarding additional damages to employees in actions for wrongful dismissal. If a condominium corporation wishes to avoid litigation and unnecessary damages, take the high road, perhaps even the road less traveled, and avoid conduct that a court will likely consider to constitute bad faith. Get advice from your lawyer!