Good Faith — Ontario Employment Law
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About Good Faith
What does it mean for an employer to act in “good faith”? In Ontario employment law, this isn't just a matter of being polite; it's a fundamental legal duty. The principle of good faith and fair dealing is an implied term in every employment contract. This means that even if it’s not written down, both the employer and employee are expected to conduct their relationship with honesty, candour, and fairness. This duty was famously established in Canadian common law and applies throughout the entire employment relationship, from hiring and performance management to the final act of termination.
While the duty is a two-way street, it places a significant obligation on employers due to the inherent power imbalance in the workplace. For an employer, acting in good faith means not being untruthful, misleading, or unduly insensitive. For example, during a termination, an employer must be honest about the reason for the dismissal. Lying about a non-existent performance issue to avoid paying proper severance would be a clear breach of this duty. Similarly, conducting the termination in a way that is intentionally humiliating, such as escorting a long-service employee out of the building in front of their colleagues for no security reason, could also be a breach.
It's crucial to distinguish the duty of good faith from the basic obligation to provide termination notice under the Employment Standards Act, 2000 (ESA) or common law. An employer can provide the correct amount of notice or pay in lieu, thus avoiding a 'wrongful dismissal' claim, but still breach the duty of good faith by the manner in which they conduct the dismissal. When this happens, courts can award additional damages, often called 'moral' or 'aggravated' damages, to compensate the employee for the harm caused by the employer's unfair conduct. Because the application of this principle depends heavily on the specific facts of a situation, understanding your rights often requires a detailed analysis of the events that occurred.
Frequently Asked Questions
What is the duty of good faith in an Ontario workplace?
It is an implied legal duty in every employment contract requiring both employer and employee to be honest, candid, and fair with one another. It prevents employers from being untruthful, misleading, or unduly insensitive, especially during termination.
Does my employer have to be nice to me to be acting in good faith?
Not necessarily. The duty of good faith doesn't prevent a boss from being demanding or having high expectations. It is breached by conduct that is dishonest, misleading, or unduly insensitive, not just by a lack of pleasantries or a difficult management style.
Is the duty of good faith written in the Employment Standards Act?
No, the duty of good faith is not explicitly in the Employment Standards Act, 2000. It is a principle developed through common law by Canadian courts, most notably the Supreme Court of Canada, and is considered an implied part of every employment agreement.
How is 'good faith' different from 'bad faith dismissal'?
Good faith is the overarching duty of honest conduct throughout employment. A 'bad faith dismissal' refers specifically to a breach of that duty during the act of termination, which can lead to additional damages. This page defines the duty, while our 'bad faith dismissal' page details the consequences of its breach.
Is there a time limit to make a claim if my employer breached their duty of good faith?
Yes. In Ontario, you generally have two years from the date you discovered the breach of good faith to file a civil lawsuit. This is governed by the Limitations Act, 2002, so it's critical to act promptly.
My employer lied about why I was being terminated. When should I talk to a lawyer?
You should consult an employment lawyer as soon as you suspect dishonesty or unfair dealing in your termination. A breach of the duty of good faith can significantly impact your legal entitlements, and a lawyer can help you understand if you are owed additional damages.
Common Scenarios
- An employer tells an employee their position is being eliminated due to restructuring, only to post a job ad for the same role a week later.
- A manager promises a key employee a significant raise and promotion to prevent them from accepting another job, but then fails to deliver on that promise for months.
- During a termination meeting, an employer falsely claims the employee engaged in serious misconduct to pressure them into signing a low severance offer on the spot.
- A company places an employee on a performance improvement plan with impossible-to-meet targets as a pretext to eventually fire them for cause.
- An employee on an approved medical leave is told their job is at risk if they don't agree to an early return date against their doctor's advice.
What You Should Know
- Keep a detailed, private log of any interactions or decisions by your employer that you believe are dishonest, misleading, or unfair.
- Save all relevant documents, such as emails, performance reviews, and offer letters, that can serve as evidence of your employer's conduct and promises.
- Remember that the duty of good faith applies to the manner of dismissal, not the dismissal itself. An employer can still terminate you without cause as long as they do it fairly and provide proper notice.
- If you are presented with a severance offer and feel you've been treated unfairly, do not sign it before seeking legal advice. A lawyer can assess whether a breach of good faith occurred, potentially entitling you to more compensation.
- Be mindful of the strict two-year limitation period in Ontario for starting a legal claim related to your employment; delaying can extinguish your rights.
Featured Cases
Bayes v. RBC
2021 ONSC 6836 (CanLII) · 2021-10-14Employment Termination: Release Agreement and Duty of Good Faith
A case involving the termination of employment where the plaintiff was terminated without cause and signed a release agreement. The court granted summary judgment in favor of the defendants, finding the release agreement enforceable and that the employer fulfilled its duty of good faith during the termination process.
Fresco v. Canadian Imperial Bank of Commerce
2020 ONSC 75 (CanLII) · 2020-03-30Overtime and Record-Keeping Breach: CIBC Case
A case involving the Canadian Imperial Bank of Commerce where the court determined that the employer breached its statutory and contractual duties by allowing uncompensated overtime and failing to maintain accurate records of hours worked. The employer's conduct was found to be negligent but not dishonest.
Gholami v The Hospital for Sick Children
2017 ONSC 1200 (CanLII) · 2017-05-02Wrongful Dismissal: Physician's Employment Status and Duty of Good Faith
A wrongful dismissal case involving a physician employed by the Hospital for Sick Children. The court found that the termination of the plaintiff's employment was in accordance with the contractual terms and did not constitute a wrongful dismissal. The case also addressed the employment status of the plaintiff and the alleged breach of the duty of good faith and fair dealing.
Williamson v. Ritz Lutheran Villa
2010 ONSC 1867 (CanLII) · 2010-03-29Wrongful Dismissal: 13.5-Year Employee Awarded 10 Months Notice
A wrongful dismissal case where an employee with 13.5 years of service was terminated without notice or severance for allegedly violating employer policies by accompanying a resident on a cruise. The court found the termination unjustified due to inconsistent policy application and lack of progressive discipline, awarded 10 months' notice, and calculated damages of $28,159.03 based on wages, benefits, and mitigation efforts.
Nortel Networks Corp. v. Jervis
2002 CanLII 49617 (ON SC) · 2002-01-04Stock Option Claw-Back Clause Upheld in Employment Contract Dispute
A case involving the enforceability of claw-back provisions in a stock option agreement between an employer and employee. The court examined whether the provisions constituted a restraint of trade, a penalty, or lacked consideration, ultimately upholding the clause as valid.