By: Stephanie McDonald and Baljinder (Bal) Singh Tiwana
When employees in Ontario face wrongful dismissal, discrimination, or unfair treatment, the law offers several forms of compensation that go far beyond basic severance or termination pay. Some damages recognize the human impact of an employer’s conduct. Others exist to punish and deter employer’s from engaging in serious misconduct.
This guide explains the differences between general, aggravated, and punitive damages—and how structured settlements can work to your advantage.
General Damages
General damages compensate for non-economic losses— intangible harm you cannot measure with receipts. They do not replace income. Instead, they recognise the real human impact of wrongful conduct, including behaviour that is malicious, insensitive, or conduct that undermines an employee’s dignity.
Courts may award general damages, or the parties may negotiate them as part of a settlement.
When do Courts Award General Damages?
Employees may receive general damages when an employer violates their human rights, treats them unfairly, or causes emotional harm during a dismissal.
Common scenarios include:
- Sexual harassment/harassment
- Discrimination based on a protected ground e.g. race, gender, disability, age
- Failure to accommodate a disability
- Bad-faith conduct, such as: Fabricating “just cause,” misleading an employee about the reason for termination, or acting dishonestly during the dismissal process
Punitive Damages
Punitive damages do not compensate—they punish. Courts award them only when the employer’s conduct “offends the court’s sense of decency.” Their purpose is to denounce outrageous, egregious, or highhanded behaviour and deter future misconduct.
Punitive damages are rarely awarded and are reserved for exceptional cases. Importantly, the court must be able to attribute the behaviour to an “independent actionable wrong.” This means the employer must have broken a separate legal rule, on top of whatever they already did to you. So for most employment cases, the main cause of action is wrongful dismissal. This means if you want punitive damages, you have to prove that the employer did something else wrong like breaching the duty of good faith, or violating your human rights.
What Counts as an Independent Actionable Wrong?
An independent actionable wrong includes:
- A breach of the duty of good faith and fair dealing that all employer’s owe employees in the performance of the employment contract
- A breach of statute, like the Ontario Human Rights Code, the Employment Standards Act, or the Occupational Health and Safety Act, including:
- Reprisal (getting in trouble or being fired for asserting your statutory rights)Discriminating against you based on a protected ground (race, ancestry, place of origin, colour, ethnic origin, citizenship, creed, sex, sexual orientation, gender identity, gender expression, age, marital status, family status or disability)Failing to accommodate your age, marital status, family status, creed or disability
- Harassment or sexual harassment
Examples of the breach of the duty of good faith include:
- Falsely alleging just cause to avoid severance payout
- Threatening an employee to force an unfair settlement
- Humiliating or degrading behaviour in the termination process
- Lying about the reason for termination
- Misleading the employee about their job security
When employers cross these lines, Courts respond decisively.
Aggravated Damages
Aggravated damages compensate for additional distress caused by an employer’s bad faith conduct during dismissal. They go beyond the normal hurt feelings that come with losing a job., Employees have to prove that they experienced mental or emotional distress, but they do not necessarily need to provide medical evidence to support a diagnosed psychological injury to receive aggravated damages.
Examples of Conduct that may Trigger Aggravated Damages:
- Misrepresenting the true reason(s) for termination
- Making baseless misconduct allegations
- Conducting biased or unfair investigations
- Omitting or manipulating key facts
- Terminating an employee in a humiliating manner
- Retaliating after the employee raises legitimate concerns
- Refusing to provide key documents such as an ROE or reference letter
Structured Settlements
A structured settlement is where part of the notice period the employer is willing to provide to you is characterized as general damages. There must be a genuine basis for the payment of general damages. If there’s not a genuine basis for the payment, the Canada Revenue Agency may decide that the amount should be taxed.
Using general damages in a settlement is a win-win because the employee still gets a fair notice period, and since general damages are non-taxable, the employer can offer a slightly lower total amount while the employee keeps the same (or more) in their pocket. It bridges gaps in negotiation, saves the employer money, and helps the employee walk away with real financial stability.
Conclusion
When employers act unfairly, discriminatorily, or in bad faith, Ontario employees may be entitled to far more than standard severance.
- General damages recognise the personal, intangible harm.
- Aggravated damages compensate for additional distress caused by more than trivial misconduct.
- Punitive damages punish employers who cross serious boundaries.
Structured settlements offer an tax efficient way to receive compensation, where there’s a genuine basis for general damages.
At Workplace Sage Legal, we guide employees, assess all available damages that could be relevant to your situation, and advocate—ferociously—to secure the compensation you deserve, whether through the Court system, or by strategic negotiation. Book a consultation today.
DISCLAIMER: This article/blog is provided for educational/informational purposes only. The views expressed are solely those of the author(s) and should not be attributed to any other party not listed as the author(s).
While reasonable efforts have been made to ensure the accuracy of the content provided, it does not constitute legal advice. Prior to relying on any aspect of this article, you should consult with a suitably qualified legal professional promptly in your relevant jurisdiction, to obtain advice tailored to your individual circumstances
Nothing in this article should be interpreted as forming a solicitor-client relationship or construed as a solicitation for legal services.
