Damages Calculation — Ontario Employment Law
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About Damages Calculation
When an Ontario employer terminates an employee without providing sufficient notice or pay in lieu, it can lead to a wrongful dismissal claim. The primary remedy in such cases is an award of “damages,” but what does that actually mean? The goal of damages calculation is not to punish the employer, but to put the employee in the same financial position they would have been in if they had been allowed to work through a proper reasonable notice period. The core formula is straightforward: (Total Monthly Compensation) x (Months of Notice) – (Mitigation Income).
The most common mistake employees make is thinking that damages are based only on their base salary. Under Ontario common law, the calculation must include all forms of compensation and benefits that were part of the employment package. This comprehensive view of compensation is crucial. It includes not just your salary or hourly wage, but also variable pay like commissions and bonuses (often calculated based on historical averages), car allowances, the value of group health and dental benefits, employer contributions to a pension or RRSP, and the value of lost stock options or other perquisites. For example, if you lost access to a company pension plan, the damages would include the contributions the employer would have made during the notice period.
From this total amount, two main things are deducted. First, any termination pay or severance pay already provided by the employer under the Employment Standards Act, 2000 (ESA) is subtracted. Second, any income earned from a new job during the notice period (known as mitigation) is also deducted. It is important to distinguish these compensatory damages from other types, such as aggravated or punitive damages, which are awarded for separate reasons like bad faith conduct during the dismissal and are calculated differently. Because determining the full value of a compensation package can be intricate, especially with variable pay or complex benefits, a detailed review is often necessary to ensure the final calculation is fair and accurate.
Frequently Asked Questions
How are my lost health and dental benefits calculated as part of damages?
Courts typically calculate the value of lost benefits in one of two ways: either by awarding the amount the employer would have paid in premiums to keep you covered during the notice period, or by reimbursing you for the out-of-pocket medical expenses you incurred that would have been covered by the plan.
My bonus was 'discretionary'. Can I still claim it in my damages calculation?
Yes, often you can. If a bonus has been consistently paid in the past, courts may find it was an integral part of your compensation, even if labelled 'discretionary'. The calculation would likely be based on the average bonus you received in the years prior to your dismissal.
What's the difference between ESA termination/severance pay and wrongful dismissal damages?
ESA pay is a statutory minimum entitlement based on a formula in the Employment Standards Act, 2000. Wrongful dismissal damages are a common law entitlement based on a reasonable notice period, which is usually much longer and includes your full compensation package. ESA amounts are a floor, not a ceiling, and are deducted from any common law damages awarded.
Do I have to pay taxes on a wrongful dismissal damage award?
Yes, the portion of the award that represents lost income is considered a 'retiring allowance' and is taxable. However, it is not subject to deductions like EI or CPP. The portion that is a direct reimbursement for legal fees or for certain other types of damages may not be taxable. It's wise to consult with a tax professional.
How long do I have to make a claim for wrongful dismissal damages in Ontario?
Under Ontario's Limitations Act, you generally have two years from the date you knew or should have known you had a claim, which is typically the date of your termination. It is critical to act within this timeframe or you may lose your right to sue.
My employer's severance offer only uses my base salary. When should I see a lawyer?
You should seek legal advice immediately. An offer based only on base salary likely undervalues your claim, as it omits other key components of your compensation like bonuses, benefits, and pension contributions. A lawyer can help you calculate the full value of what you are owed.
Common Scenarios
- A sales director is terminated and the initial severance offer fails to account for the substantial commissions they would have earned during their 18-month notice period.
- A long-service technician is let go, and the termination package doesn't include the value of the employer's matching RRSP contributions that are now lost.
- A marketing manager who always receives an annual performance bonus is dismissed in January, and the employer's offer neglects to include a pro-rated amount for the previous year's work.
- An employee is terminated and the employer offers to pay for their health benefits for three months, but their reasonable notice period is determined to be nine months, creating a gap in the damages calculation.
- An executive is dismissed and their package omits the value of perquisites like their car allowance and professional development budget, which were integral parts of their compensation.
What You Should Know
- Gather all documents related to your compensation before and after termination, including pay stubs, bonus letters, commission statements, benefits booklets, and records of income from any new work.
- Do not assume a severance offer is fair just because it seems like a large number. Always break it down to see if it accounts for all parts of your compensation, not just salary.
- Understand that statutory pay under the Employment Standards Act, 2000 is just the minimum. Your common law entitlements, which form the basis of a damages calculation, are often significantly higher.
- If your compensation package was complex (e.g., including stock options, variable bonuses, or a pension), it is crucial to have it professionally assessed to ensure the damages calculation is accurate.
- When a severance offer is presented, seeking advice from an employment lawyer can help you understand the true value of your claim and whether the employer's calculation is correct and complete.
Featured Cases
Cuconato v. Parker Auto Care Ltd.
2018 ONSC 2803 (CanLII) · 2018-05-03Senior Technician Wrongful Dismissal: 20 Months' Notice Awarded
A senior automotive technician with 25 years of service was dismissed for cause after a sexual gesture. The court determined the dismissal was wrongful and awarded 20 months' notice, including salary and benefits, less mitigation income. The case also addressed the plaintiff's mitigation efforts and the exclusion of an ex gratia payment and pension contributions from the damages calculation.
Ahmed v. Concord Hard Chrome Limited
2014 ONSC 3252 (CanLII) · 2014-05-28Wrongful Dismissal: Just Cause and Mitigation in Employment Case
A wrongful dismissal case where an employee was terminated after an argument over statutory holiday pay. The court determined the employer lacked just cause, awarded six months' notice, and reduced damages based on the plaintiff's mitigation efforts.
Gristey v. Emke Schaab Climatecare Inc.
2014 ONSC 1798 (CanLII) · 2014-03-20Wrongful Dismissal: 12-Year Employee Awarded 8 Months' Notice
A wrongful dismissal case where a 12-year employee was terminated without cause. The court reduced the notice period from 12 months to 8 months due to economic factors, found the plaintiff adequately mitigated damages, and calculated wrongful dismissal damages based on 8 months' pay after statutory and mitigation deductions.
Evans v. Complex
2012 ONSC 6508 (CanLII) · 2012-11-16Wrongful Dismissal: 9-Month Notice Period and Damages Awarded
A wrongful dismissal case where an employee with 8.5 years of service was dismissed without cause. The court determined a 9-month notice period, considering age, length of service, and role. Damages included salary, bonus, and benefits, with no deduction for post-termination benefits. The employer's unprofessional conduct was noted but did not warrant bad faith damages.
Abrahim et al v. Sliwin et al
2012 ONSC 6295 (CanLII) · 2012-11-05Wrongful Dismissal: Common Employer Doctrine and Damages Calculation
A wrongful dismissal case involving the common employer doctrine, where the court determined that defendants were jointly and severally liable for damages. The court also addressed the calculation of damages, mitigation efforts, and awarded pre-judgment interest and costs.
Dwyer v. Advanis Inc.
2009 CanLII 23869 (ON SC) · 2009-05-12Wrongful Dismissal: VP Terminated After 4 Years Awarded 12 Months Notice
A wrongful dismissal case involving a Vice President and Executive Vice-President who was terminated after nearly four years of employment. The court applied the Bardal factors to determine whether 12 months constituted reasonable notice, and assessed damages based on base salary and projected variable compensation. The employer was found not to have acted in bad faith, and the termination was deemed to be motivated by financial losses and restructuring, not disability or immigration status.
Adjemian v. Brook Crompton North America
2008 CanLII 27469 (ON SC) · 2008-06-06Wrongful Dismissal: 22.5-Year Employee Awarded 16 Months Notice
A wrongful dismissal case where the plaintiff was dismissed without cause after 22.5 years of service. The employer provided four months’ salary and benefits, but the plaintiff sought damages for 16 months’ notice. The court applied the Bardal factors to determine reasonable notice and awarded damages for salary, benefits, pension contributions, and bonus. The court also addressed the plaintiff’s mitigation efforts and granted summary judgment as no genuine issue for trial existed.
Weaver v. Casey's Welding Service Ltd.
2007 CanLII 6937 (ON SC) · 2007-03-12Wrongful Dismissal: Pre-Judgment Interest Calculated on Installment Basis
A wrongful dismissal case involving a dispute over the calculation of pre-judgment interest on lost salary, with the court adopting an installment approach to reflect actual loss and mitigation earnings.
MacMillan v. Brantpack Distributing Ltd.
2006 CanLII 23262 (ON SC) · 2006-06-28Wrongful Dismissal: 61-Year-Old Employee Awarded 9 Months Notice and $66,973 in Damages
A wrongful dismissal case where the plaintiff, terminated at age 61, was awarded nine months' reasonable notice. The court applied the Wallace framework to assess employer conduct and determined that no extension of notice was warranted due to lack of malicious intent. The plaintiff was also awarded $66,973 in damages for salary, car benefits, and bonuses during the notice period.
Morland v. Kenmara Inc.
2006 CanLII 4902 (ON SC) · 2006-02-20Constructive Dismissal: Hostile Work Environment Leads to Damages Award
A constructive dismissal case where the plaintiff alleged a hostile work environment due to the employer's abusive conduct, including foul language and threats. The court found the employer's actions created an intolerable work environment, leading to constructive dismissal. The plaintiff was awarded four months' salary in damages, including an additional month under the Wallace principle.
Hayward v. 331265 Ontario Ltd.
2005 CanLII 12852 (ON SC) · 2005-04-20Wrongful Dismissal: 14-Year Stockroom Keeper Awarded 8 Months Notice
A wrongful dismissal case involving a plaintiff employed for over 14 years as a stockroom keeper who was dismissed without cause. The court applied the Bardal factors to determine an 8-month notice period and awarded damages of $6,728 after considering mitigation of losses and statutory deductions. The plaintiff's physical limitations from a workplace injury were considered but did not affect the assessment of reasonable notice.
Serrao v. National Bank Financial Inc.
2004 CanLII 880 (ON SC) · 2004-06-30Wrongful Dismissal: Options Trader Seeks 12 Months Notice and Damages
A wrongful dismissal case involving an options trader who was terminated without cause after four years of service. The court assessed the reasonable notice period using the Bardal framework and determined whether 12 months was appropriate. The case also addressed the calculation of damages based on historical average income and the recoverability of out-of-pocket expenses incurred during the notice period, including medical and job search costs. The court also considered whether an employer could set off a negative balance in a drawings account against wrongful dismissal damages.
Dubey v. CDA Industries Inc.
2004 CanLII 7896 (ON SC) · 2004-03-22Wrongful Dismissal: 21-Year Foreman Awarded 18 Months Notice
A wrongful dismissal case involving a plaintiff employed for 21 years as a foreman who was terminated at age 57 without prior warning. The court determined 18 months’ notice was reasonable, applied the Bardal factors, and calculated total compensation for 18 months at $108,495, less amounts already paid. The court also found the plaintiff’s efforts to mitigate damages were reasonable.
D'Aoust v. 1374202 Ontario Inc.
2003 CanLII 38391 (ON SC) · 2003-06-10Constructive Dismissal: Commission Non-Payment and Issue Estoppel
A constructive dismissal case where the plaintiff alleged non-payment of commissions constituted a substantial breach of contract, leading to his constructive dismissal. The defendant denied any agreement existed and claimed the plaintiff voluntarily left. The court considered whether issue estoppel applied due to a prior Employment Insurance Commission determination and whether a contractual obligation to pay commissions existed.
Lennox v. Arbor Management Services Inc.
2000 CanLII 22605 (ON SC) · 2000-07-13Wrongful Dismissal: Employee Awarded Nine Months' Salary for Improper Termination
A wrongful dismissal case where an employee was dismissed for alleged dishonesty and working for a competitor during parental leave. The employer failed to follow its own disciplinary procedures and did not provide sufficient warnings, and the employee’s conduct did not meet the threshold for dismissal for cause. The court awarded nine months’ salary and benefits for wrongful dismissal.
McNamara v. Alexander Centre Industries Ltd.
2000 CanLII 22603 (ON SC) · 2000-05-24Wrongful Dismissal: 59-Year-Old President Awarded 26 Months Notice
A wrongful dismissal case involving a 59-year-old president with 24 years of service who was terminated without cause. The court determined a 24-month notice period under Bardal factors and awarded an additional two months’ notice for bad faith dismissal under Wallace principles. The case also addressed the calculation of damages, including salary, benefits, and pension, and whether disability payments should reduce the damages awarded.
Monti v. Hamilton-Wentworth (Regional Municipality)
2000 CanLII 22615 (ON SC) · 2000-02-11Wrongful Dismissal: 20 Months Notice Awarded Based on 1995 Income
A wrongful dismissal case where the plaintiff was awarded 20 months’ notice or damages in lieu. The court determined that the plaintiff’s 1995 income, the highest earned, should be used as the basis for calculating damages, rather than a hypothetical maximum income during the notice period. The court also deducted severance payments and working notice period from the total damages.
Knezevic v. Rodger W. Armstrong & Associates Ltd.
1997 CanLII 12337 (ON SC) · 1997-09-23Constructive Dismissal: Employee Awarded 8 Weeks Notice for Contract Breach
A constructive dismissal case where the plaintiff alleged that unilateral changes to hours, days, and nature of work constituted a fundamental breach of the employment contract. The court found the changes were fundamental and not temporary, establishing constructive dismissal. The plaintiff was awarded damages equivalent to eight weeks’ notice, calculated based on $11.50 per hour and 37 hours per week, totaling $3,404.00.
Schumacher v. Toronto Dominion Bank
1997 CanLII 12329 (ON SC) · 1997-05-15Constructive Dismissal: Senior Executive Awarded 13-Month Notice Damages
A constructive dismissal case involving a senior executive whose responsibilities were unilaterally reduced following the hiring of another executive. The court found that the changes constituted a fundamental breach of the employment contract, establishing constructive dismissal. The employee was awarded damages for a 13-month notice period, including salary, bonus, stock options, and benefits.
Garcia v. Newmar Windows Manufacturing
1996 CanLII 8163 (ON SC) · 1996-10-03Constructive Dismissal: 17-Year Employee Awarded 14 Months Notice
A constructive dismissal case where the plaintiff was demoted to menial tasks despite being appointed assistant to the plant manager, with the employer failing to provide a clear job description. The plaintiff was employed for 17 years in supervisory roles, and a notice period of 14 months was awarded, along with damages calculated based on salary, benefits, and mitigation of losses. Aggravated and punitive damages were also awarded for the employer's conduct.