Bad Faith — Ontario Employment Law
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About Bad Faith
In Ontario employment law, the concept of 'bad faith' refers to an employer's breach of its duty to act honestly and fairly in its dealings with an employee. While employers have the right to manage their business and make decisions like terminating employment, they cannot exercise these rights in a manner that is dishonest, misleading, or unduly insensitive. This principle, solidified by the Supreme Court of Canada, means there is an underlying obligation of good faith performance in every employment contract.
Bad faith is not simply poor management or having an unpleasant boss. It involves a higher level of misconduct. Examples include an employer being untruthful about the reason for a termination, fabricating performance issues to justify a dismissal, conducting a biased or sham workplace investigation, or using the threat of termination to intimidate an employee into accepting a lesser role. The duty of good faith applies throughout the entire employment relationship—from hiring and performance management to the manner of dismissal. While it is most commonly argued in the context of termination (a topic covered in more detail on our 'bad faith dismissal' page), an employer's bad faith conduct during the course of employment can also give rise to legal claims.
Under the common law, if an employer is found to have acted in bad faith, a court can award additional damages beyond standard termination pay. These are often called 'moral' or 'aggravated' damages, intended to compensate the employee for the mental distress, humiliation, or harm to their reputation caused by the employer's blameworthy conduct. This is separate from damages for wrongful dismissal, which compensate for the failure to provide adequate notice. Because determining whether an employer's actions meet the legal standard for bad faith is so dependent on the specific details of the situation, understanding your rights and the evidence required is a critical first step.
Frequently Asked Questions
What is the legal definition of 'bad faith' in Ontario employment?
In Ontario, 'bad faith' refers to a breach of the duty of honest and fair dealing in an employment contract. It involves conduct that is dishonest, misleading, malicious, or unduly insensitive, particularly when an employer is exercising its contractual powers, such as discipline or termination.
Is having a difficult or incompetent manager considered bad faith?
Not necessarily. Poor management, personality conflicts, or incompetence are generally not enough to meet the legal test for bad faith. Bad faith requires a more serious element of dishonesty, untruthfulness, or malicious intent in the employer's conduct.
What kind of damages can I claim if my employer acted in bad faith?
If you can prove bad faith, you may be entitled to moral or aggravated damages. These are awarded to compensate for the mental distress and harm caused by the employer's conduct, and are separate from any pay in lieu of notice you might receive for wrongful dismissal.
Can my employer act in bad faith even if I haven't been fired?
Yes. The duty of good faith applies throughout the employment relationship. Examples include being deliberately misled about a promotion, being subjected to a sham investigation, or being harassed in an attempt to force you to quit (which could be a constructive dismissal).
How do I prove that my employer's actions were in bad faith?
Proving bad faith requires evidence that shows the employer was dishonest, misleading, or unduly insensitive. This can include emails containing false statements, witness testimony, or documents that reveal a fabricated reason for discipline or termination.
Is there a deadline for making a bad faith claim in Ontario?
Yes, in most cases, you have two years from the date you discovered (or ought to have discovered) the bad faith conduct to file a civil lawsuit, as per Ontario's 'Limitations Act, 2002'. It's crucial to act promptly to protect your rights.
When should I consult an employment lawyer about potential bad faith?
You should consider consulting a lawyer if you believe your employer has been untruthful, has targeted you unfairly, or has acted in a cruel or exceptionally insensitive manner, especially during a vulnerable time like a performance review, investigation, or termination.
Common Scenarios
- An employer, wanting to avoid paying a large severance package, creates a false record of poor performance for a long-service employee to justify a 'for cause' termination.
- A manager lies to an employee, assuring them their job is secure after a merger, which convinces the employee to decline another job offer, only to be terminated weeks later.
- During a harassment complaint investigation, the employer only interviews witnesses friendly to the alleged harasser and dismisses the complaining employee's evidence without proper consideration.
- An employee on approved medical leave is told their position is being eliminated, but the company immediately posts a job opening for the exact same role under a slightly different title.
- An employer terminates an employee and then makes false and damaging statements about them to a recruitment agency, hindering their ability to find new work.
What You Should Know
- Keep a detailed, private log of all interactions you believe are dishonest or malicious, including dates, times, what was said, and who was present.
- Preserve all written communications, such as emails, text messages, or official letters, that could serve as evidence of the employer's misleading conduct or statements.
- Understand that a claim for bad faith is distinct from a wrongful dismissal claim; it focuses on the manner of treatment, not just the failure to give notice.
- Be mindful of the two-year limitation period in Ontario to commence a legal claim, which starts from the moment the bad faith conduct occurs or is discovered.
- Because these claims are complex and fact-specific, seeking an early consultation with an employment lawyer can help you determine if your employer's behaviour legally constitutes bad faith.
Featured Cases
W. v. Olympic Wholesale
2026 ONSC 3620 (CanLII) · 2026-06-26Wrongful Dismissal: 19 Months' Notice Plus 14 for Bad Faith
This wrongful dismissal case addressed whether a supervisor's long-standing practice of 'topping up' hours constituted just cause for termination under the ESA. The court found just cause was not established and determined reasonable notice based on the Bardal factors for a 55-year-old employee with 17 years of service. The court fixed reasonable notice at 19 months and extended it by 14 months because bad faith in the manner of dismissal impaired the search for new work.
K. v. GoEasy Ltd
2026 ONSC 3513 (CanLII) · 2026-06-16Wrongful Dismissal: 8 Months Notice & Inducement Claim
This wrongful dismissal case addressed whether an employer induced a senior employee from secure prior employment to increase the reasonable notice period, ultimately dismissing the inducement claim. The court determined an eight-month notice period based on Bardal factors, including the employee's senior management role and the availability of similar employment. Additionally, the court awarded pro-rated short-term incentive plan (STIP) and long-term incentive plan (LTIP) compensation during the notice period but dismissed claims for bad faith, punitive, and moral damages.
K. v. Kingston Area Taxi Licensing Commission
2025 ONSC 4706 (CanLII) · 2025-08-14Constructive Dismissal: 24 Months Notice & Aggravated Damages
This is a merits decision in a wrongful dismissal case where the plaintiff alleged constructive dismissal due to a hostile work environment, including micromanagement, harassment, and bad faith contract negotiations. The court found that the defendant's conduct fundamentally breached the employment relationship, establishing constructive dismissal and awarding damages for the manner of dismissal.
B. v. Salesforce.com
2025 ONSC 2580 (CanLII) · 2025-04-28Wrongful Dismissal: 11 Months' Notice Cut to 8
This wrongful dismissal case addressed the reasonable notice period for a plaintiff terminated after eight years of service, where the court found 11 months’ reasonable notice and reduced it to eight because the plaintiff would not produce evidence of earnings during the job search. The court also ruled on compensation during the notice period, finding the employer's bonus policy unenforceable, but denied bad faith damages and reimbursement for retraining expenses.
R.-C. v. BMO Nesbitt Burns Inc.
2024 ONSC 161 (CanLII) · 2024-01-08Wrongful Dismissal: 24-Month Notice for 24-Year Advisor
This wrongful dismissal case concerns an investment advisor with 24 years of service who was terminated without notice. The court addressed whether the employer could establish just cause based on after-acquired misconduct involving confidential data, and determined the plaintiff was entitled to 24 months' reasonable notice. The case also examined damages for lost opportunity to sell a book of business and potential bad faith in the manner of dismissal.
K. v. Controlex Corporation
2023 ONSC 7045 (CanLII) · 2023-12-13Wrongful Dismissal: 18.5-Year Executive Awarded 24 Months Notice
A wrongful dismissal case involving a senior executive with 18.5 years of service who was summarily dismissed without cause. The court awarded 24 months' notice in lieu of reasonable notice, along with $50,000 in aggravated damages for bad faith conduct and $50,000 in punitive damages for malicious behavior. Substantial indemnity costs of $192,112.19 were also awarded due to the employer's failure to defend the action.
T. v. Aurora Hotel Group
2023 ONSC 1324 (CanLII) · 2023-02-23Wrongful Dismissal: GM Awarded 7 Months Notice
This wrongful dismissal case involved a senior General Manager with three years of service who was terminated without cause. The court applied the Bardal factors to determine that seven months of reasonable notice was appropriate, rejecting the employer's argument that short tenure reduced the period. Additionally, the court awarded $15,000 in moral damages for the employer's bad faith conduct and 10% of compensation for lost fringe benefits during the notice period.
M. v. Southgate (Township)
2021 ONSC 7000 (CanLII) · 2021-10-20Discriminatory Dismissal: Moral & Punitive Damages Awarded
This case addresses a wrongful dismissal involving a plaintiff terminated from dual roles as an administrative assistant and volunteer fire captain. The court examined whether the dismissal was accompanied by bad faith conduct, including the use of unfounded sexist allegations, and whether this violated the Ontario Human Rights Code. The decision covers reasonable notice, moral damages for mental distress, and punitive damages for the employer's discriminatory and high-handed behavior.
W. v. Desjardins General Insurance
2021 ONCA 672 (CanLII) · 2021-09-29W. v Desjardins: Breach of Privacy Claim Struck
This was an appeal to the Court of Appeal from a motion judge's decision striking various claims. The appellants were an employee who was fired and her friend. The friend had listed the employee as a witness in an insurance tribunal case against the employee's employer, Desjardins, which then fired the employee. The motion judge struck the plaintiffs' claims for breach of privacy, punitive damages, and claims against Desjardins' counsel. The Court of Appeal upheld the motion judge's decision and dismissed the appeal, noting that no breach of privacy occurred because witness lists in a tribunal proceeding are not private, and that any bad faith claims relating to accident benefits had to proceed before the Licence Appeal Tribunal.
Y. v Hudson’s Bay Company
2021 ONSC 387 (CanLII) · 2021-01-18Wrongful Dismissal: 16 Months Notice Awarded to 62-Year-Old
This wrongful dismissal case involved a plaintiff with 11.65 years of service who was terminated at age 62. The court applied the Bardal factors to determine the reasonable notice period, awarding 16 months' notice, and addressed whether the COVID-19 pandemic impacted this determination. Additionally, the court awarded damages for unpaid bonus and pension contributions during the notice period but found no evidence to support claims of bad faith or punitive damages.
K. v. Canadian Tire Corporation, Limited
2020 ONCA 709 (CanLII) · 2020-11-09Enforcement of Employment Settlement Agreement Appeal
This is an appeal from a motion judge's decision enforcing a settlement agreement that resolved employment claims. The Court of Appeal for Ontario dismissed the appeal, upholding the enforcement of the minutes of settlement and rejecting arguments regarding unilateral mistake, fraud, and bad faith by the employer.
M. v Dynacast Ltd.
2019 ONSC 7146 (CanLII) · 2019-12-17Constructive Dismissal: 28 Months Notice Awarded
This case addresses whether the employer's unilateral reassignment of the plaintiff to a lower-status position with significant changes to duties and compensation constituted constructive dismissal. The court applied the Potter test and found the plaintiff entitled to 28 months' notice. Additionally, the court awarded $25,000 in aggravated damages due to the employer's bad faith conduct and determined that income from inferior employment and self-employment during the notice period was not deductible from damages.
C. v. Township of Otonabee-South Monaghan
2019 ONSC 6978 (CanLII) · 2019-12-02Wrongful Dismissal: 15-Year Employee Notice Period Dispute
This wrongful dismissal case involves a plaintiff terminated without cause after 15 years of service in a rural municipality, disputing the appropriate reasonable notice period. The court applied common law factors regarding age, length of service, and availability of comparable employment to determine if a 15-month notice period was justified. The case also addressed the plaintiff's duty to mitigate damages in a rural job market and allegations of bad faith dismissal, ultimately finding no bad faith despite the employer's failure to continue benefits during the statutory notice period.
H. v. Sagemedica Inc.
2019 ONSC 7411 (CanLII) · 2019-11-14Wrongful Dismissal: Common Employer & Bad Faith Damages
This wrongful dismissal case addresses whether two corporations under common control constitute a 'common employer' liable for terminating an employee without notice. The court applied the Bardal factors and ESA statutory entitlements to determine damages for unpaid wages, vacation pay, and aggravated damages resulting from the employer's bad faith conduct. Additionally, the case considered the personal liability of a sole director for oppressive conduct under corporate legislation.
P. v. Richmond Hill (Town)
2018 ONSC 6414 (CanLII) · 2018-11-08Municipal Severance Deduction Reviewed for Bad Faith
This is a judicial review of a municipal by-law enacted to deduct severance payments from a former councillor. The Divisional Court addressed whether the Town acted in bad faith by enacting the by-law without notice and whether the limitation period defence was valid. The court reviewed the specific section of the by-law targeting the severance payment.
V.W. v. Thumper Massager Inc.
2018 ONSC 6622 (CanLII) · 2018-11-07Probationary Employee Wrongful Dismissal Appeal
This is an appeal to the Divisional Court from a motion judge's summary judgment decision in a wrongful dismissal case involving a probationary employee. The appellant challenged the binding nature of a probation clause, claimed inducement to leave prior employment, and alleged bad faith during probation. The appeal was dismissed as the court found the probation clause binding, no inducement was established, and the employer met its obligations without bad faith.
W. v. Mex Precision Wire Corporation
2018 ONSC 6572 (CanLII) · 2018-11-06Wrongful Dismissal: 12-Month Notice Awarded to 59-Year-Old
This wrongful dismissal case involved a 59-year-old plaintiff with 12 months of employment who was induced to leave secure employment. The court applied the Bardal factors to determine a reasonable notice period of 12 months, reduced by amounts paid and mitigation. Additionally, the court awarded $10,000 in aggravated damages for the employer's bad faith conduct during dismissal, while dismissing the separate tort claim for intentional infliction of mental suffering due to insufficient medical evidence.
G. v. The Hospital of Sick Children
2018 ONCA 783 (CanLII) · 2018-09-27G. v Sick Children: Fixed-Term Wrongful Dismissal Appeal
This is an appeal from a trial decision in a wrongful dismissal case involving an employee on a one-year fixed-term contract who was terminated without cause. The Court of Appeal addressed whether the trial judge erred in finding no wrongful dismissal, the quantification of damages limited to the contract term, and allegations of bad faith in the manner of dismissal. The court remitted issues regarding the calculation of damages, mitigation obligations, and a defamation claim back to trial for determination.
M. v. Information Systems Architects Inc.
2018 ONCA 428 (CanLII) · 2018-05-07Fixed-Term Independent Contractor - No Duty to Mitigate
This is an appeal to the Court of Appeal from a motion judge's decision granting summary judgment to an independent contractor. The contractor signed a fixed-term contract but was terminated after one month due to a dated criminal record he had previously disclosed. The motion judge found the employer breached its duty of good faith and awarded damages for the unexpired term with no duty to mitigate. The Court of Appeal dismissed the appeal, holding that the duty of good faith applied and that the principle of no duty to mitigate for fixed-term contracts applies to independent contractors in these circumstances.
P. v. CIBC
2018 ONSC 1458 (CanLII) · 2018-03-02Settlement Privilege in Wrongful Dismissal Bad Faith Claims
This is an interlocutory motion to strike decision in a wrongful dismissal action. The plaintiff sought to strike paragraphs in the statement of defence that referenced a without prejudice termination offer, arguing it was irrelevant and protected by settlement privilege. The court dismissed the motion, ruling that the termination offer was relevant to the plaintiff's allegations of bad faith conduct in calculating severance and pay in lieu of notice, and thus settlement privilege did not bar its inclusion in the pleadings.