November 27, 2017

B.C. Court of Appeal clarifies standard for award of aggravated damages based on mental distress in wrongful dismissal cases

The B.C. Court of Appeal recently reversed a lower court decision and ruled that the “ordinary psychological impact” one experiences upon being terminated from a job is not compensable as aggravated damages.

The plaintiff, Mr. Lau, brought a wrongful dismissal action against Royal Bank of Canada and sought to recover aggravated damages for mental distress arising from the termination of his employment.  During the trial, Mr. Lau testified that after being terminated, he felt “horrible” and “lost” because he thought he was going to work for RBC for a long time.

The trial judge awarded aggravated damages to Mr. Lau in the amount of $30,000, based, in part, on a finding that RBC’s investigation which led to the termination was flawed and also based on Mr. Lau’s mental distress over the termination.  Even though Mr. Lau had not presented any medical evidence about the impact that the termination had on him, the trial judge concluded that Mr. Lau was depressed, based on the manner in which he testified.

The Court of Appeal in Lau v. Royal Bank of Canada, 2018 BCCA 253, set aside the trial judge’s decision and discussed the standard for awarding aggravated damages.  The Court of Appeal noted there is no requirement that a plaintiff present expert testimony in order to substantiate a claim of mental distress.  However, damages for mental distress must be based on evidence of a “serious and prolonged disruption that transcended ordinary emotional upset or distress.” (paragraph 49).

The Court concluded that the trial judge erred by basing the award for aggravated damages on her observation of the plaintiff’s demeanor when testifying.  There was no evidence from family members, friends or third parties concerning the impact of the termination of Mr. Lau and his mental state.

The Court of Appeal stated in its judgment at paragraph 69:

“To receive aggravated damages based on mental distress, the employee is required to show that the manner of dismissal caused injury rising beyond the normal distress and hurt feelings that arise from the fact of dismissal. In this case, Mr. Lau did not adduce evidence which could have discharged that burden.”

This decision clarifies once again that in order to recover aggravated damages for mental distress caused by a wrongful dismissal the plaintiff must prove mental injury above and beyond the normal distress experienced upon being terminated from one’s job.


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