Ontario court orders 14 months of additional damages for employer’s bad faith and unfair conduct

Key takeaways

• In the decision of Wilsher v. Olympic Wholesale, the Court awarded 19 months of common law reasonable notice damages and an additional 14 months for the employer’s bad faith and unfair conduct, totaling 33 months.
• The Court found no just cause for termination, noting that the plaintiff’s alleged misconduct was condoned, tolerated and institutionalized in the workplace.
• This decision underscores the need for careful documentation and fair treatment during workplace investigations to avoid liability for wrongful terminations.

In the recent decision of Wilsher v. Olympic Wholesale, 2026 ONSC 3620, the Ontario Superior Court of Justice awarded 19 months of common law reasonable notice damages to an employee with 17 years of service, plus 14 months of additional damages for the employer’s bad faith and unfair conduct. This included, among other things, a one-sided investigation into the employee’s misconduct, an interrogation-style interview and a misreported Record of Employment (ROE).

The Court’s decision affirms the high standard that the courts impose on employers with respect to for-cause terminations. It is a cautionary tale to employers who wish to rely on workplace investigations to justify a for-cause termination.

The facts

At the time of his termination, the plaintiff was 55 years old, had 17 years of service with the employer and held the role of night shift supervisor. When the plaintiff was first promoted to this role (8 years before his termination), he shadowed another supervisor in order to learn more about his role. He did not receive a job description, training materials, policies or procedures in connection with his onboarding. During this “shadowing” period, the other supervisor taught the plaintiff how to adjust employees’ hours in the employer’s systems. The plaintiff understood that adjusting employees’ timesheets was an “ordinary and usual responsibility” of a night shift supervisor.

Eight years later, another supervisor advised the employer that the plaintiff was manipulating timesheets by topping off employees’ hours and letting them leave work early while still topping up their hours. This supervisor alleged that the plaintiff was engaging in time theft for the benefit of certain employees in exchange for favours, contrary to company policies.

In connection with the investigation, and without notice to the plaintiff, the employer called the plaintiff into a room with certain employer representatives, wherein he was questioned about his adjustments to employee timesheets. The employer asked the plaintiff why he was adjusting hours, to which he responded that he was adding hours when individuals skipped their lunches and breaks to get work done, which he understood was a long-standing and routine practice to ensure that employees received 40 hours of work per the applicable collective agreement.

The employer then interviewed labourers on the plaintiff’s shift, who advised that they never missed a break. One labourer said that he would skip breaks and go home for lunch with the plaintiff’s approval. The employer called the plaintiff back into the interview room thereafter and asserted that the plaintiff had admitted to committing fraud and was being fired.

The employer asserted just cause for the plaintiff’s termination. The employer issued a ROE to the plaintiff that included the Code “M” for “dismissal or suspension”. The employer did not provide any references to the plaintiff, which limited his ability to secure alternative work, and thereby mitigate his damages on termination.

The Court noted a number of significant flaws in the employer’s investigation, including that the employer only reviewed the plaintiff’s timesheet adjustments during the investigation, and did not review conduct from other supervisors, despite evidence that the practice was widespread. The employer also took no action in respect of employees who had allegedly benefitted from the plaintiff’s timesheet adjustments. Further, the investigation was initiated by a manager who acknowledged a negative relationship with the plaintiff, creating the appearance that he had been singled out.

No just cause

Under the Employment Standards Act, 2000 (ESA), to avoid the obligation to provide either notice of termination or pay in lieu or statutory severance pay, an employer must establish that the employee engaged in wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned by the employer. Applying McKinley v. BC Tel, 2001 SCC 38, to the employer’s allegations that the plaintiff had engaged in dishonest and fraudulent conduct, the Court was tasked with determining (1) whether the evidence established the employee’s deceitful conduct on a balance of probabilities and (2) if so, whether the nature and degree of the dishonestly warranted dismissal.

The Court ultimately determined that the employer failed to establish “just cause” for the plaintiff’s employment, including because:

• From the start of the plaintiff’s employment, supervisors allowed warehouse night shift employees to go home early if all their work was completed before the shift’s end. Supervisors then “topped up” the employees’ hours to shift end.
• The plaintiff’s shadowing as part of his onboarding included instruction on how to log into the time management system to “add hours” to employees’ timesheets.
• No training of any kind was provided to the plaintiff other than the shadowing, and no job description, training manual, memorandums, policies, procedures or training manuals were prepared or provided to the plaintiff regarding his duties and responsibilities as a supervisor or for accessing the time management system.
• The plaintiff followed all the usual practices and procedures that were in place when he was appointed as a supervisor, including the practice of allowing the night shift employees to leave early if all their work was completed and to “top up” the employees’ hours to shift end.
• All “top up” edits made by the plaintiff were made by him on his company laptop using his passcode and individual employee identifier, such that all edits were readily identified and attributed to him. The edits were always transparent and the plaintiff never attempted to disguise the edits he made to employees’ hours.
• The plaintiff understood and believed that the supervisors’ practice of allowing employees to leave when all work was complete and “topping up” hours to shift end was in alignment with the employees’ collective agreement that guaranteed them 40 hours of work per week.
• As a supervisor, the plaintiff never personally benefitted from the “topping up” practice.
• The “topping up” practice continued even after the plaintiff’s termination and had been instituted by all night shift supervisors for a period of (at least) 19 years.

The above factors led the Court to conclude that the employer knowingly tolerated, condoned and institutionalized the practice of “topping up” timesheets. Even if the practice amounted to dishonesty or misconduct, there appeared to be sufficient justification for the practice from the plaintiff’s perspective.

Accordingly, the plaintiff was entitled to common law reasonable notice of termination in connection with the termination of his employment. Based on his age, length of service, availability of similar employment and other factors (the oft-quoted Bardal factors), the Court determined that the plaintiff was entitled to 19 months of common law reasonable notice.

Additional damages for bad faith and/or unfair dealings

While the Court dismissed the plaintiff’s claim for aggravated or punitive damages, the Court determined that the plaintiff was entitled to an additional 14 months of common law reasonable notice (for a total notice period of 33 months) for the following reasons:

1. The employer’s investigation was clearly targeted at the plaintiff, without any attempt to understand or otherwise appreciate the full extent of the “topping up” practice.
2. No other supervisors were investigated in connection with the “topping up” allegations (indeed, the employer suggested that further investigation wasn’t required in order to “prove the plaintiff’s case”).
3. The employer’s interview of the plaintiff resembled an interrogation, rather than an interview, as the plaintiff was not provided with any notice or explanation regarding the interview and, further, the interview was conducted in a “high-handed, one-sided and biased manner, intended to intimidate” the plaintiff.
4. The plaintiff’s replacement was ultimately terminated for the same conduct, indicating that the employer had not attempted to correct or prevent the “topping up” practice from continuing.
5. The termination letter accused the plaintiff of fraudulent behaviour and theft of time, and the plaintiff’s ROE recorded “dismissal/suspension”, which prevented him from obtaining employment benefits and inhibited his search for new employment.

The Court confirmed that the foregoing amounted to bad-faith conduct and unfair dealings on the part of the employer. This additional notice period was further justified on the basis of the plaintiff’s inability to find another job and the embarrassment and humiliation he suffered at the hands of the employer.

In addition to awarding 33 months of compensation, the Court ordered the employer to amend or correct the plaintiff’s ROE to delete any reference to “dismissal/suspension”.

Implications for employers

This case highlights the danger of relying on for-cause termination allegations where the impugned conduct has been otherwise tolerated and institutionalized in the workplace. It is increasingly difficult to terminate individuals for misconduct if such misconduct has been condoned by the employer to some extent. Accordingly, employers should exercise caution before asserting just cause on terminations without a full investigation into the circumstances.

This decision also reiterates the importance of taking measured and documented steps in a workplace investigation that has the potential to result in a termination. Employers should appropriately consider the impact of the alleged conduct on the workplace and ensure that appropriate and fair steps are taken in respect of any individuals who may be implicated in the investigation. Based on the circumstances, the employer should be comfortable with the results of a workplace investigation, noting the Court’s comments regarding the employer’s bad faith and unfair conduct, before taking corrective or disciplinary action against an employee.

An employer may not, on the Court’s reasoning, be liable for punitive or aggravated damages, but may nonetheless still be liable for increased notice periods in connection with bad faith or unfair conduct.