Yes, an employee can recover for damage to his reputation caused by the manner of termination of his employment. This is not a surprising outcome based on the principles established by the Wallace decision of the Supreme Court of Canada, but it took a Federal Court of Appeal review of an earlier decision to get there. ( Tipple v. Attorney General of Canada , 2012 FCA 158)
Douglas Tipple was a senior executive in the federal public service. He was terminated amidst some controversy but an internal investigation cleared him of wrongdoing. Unfortunately for Tipple, that message was never given to the media and the idea that Tipple was fired because of the controversy was promoted in the House of Commons and left uncorrected by his bosses.
An adjudicator awarded Tipple $250,000 (as part of an overall award of approximately $1.4 million) for damage to his reputation. The Federal Court overturned that award, saying there was no independent duty to protect a terminated employee's reputation. At our client conference last year, we predicted a successful appeal of the Federal Court's decision. The Federal Court of Appeal saw the case the same way and has now restored the award for damage to Tipple's reputation.
It is important to note what the Federal Court of Appeal did not decide. It did not create a free standing duty of an employer to protect the reputation of a terminated employee. In fact, it expressley rejected any such duty. Rather, it applied the principle addressed in Wallace and in Keays v. Honda Canada Inc., where the damages were increased because of bad faith conduct by the employer in the course of terminating the employment relationship, and ruled:
... this principle may be applied if ... (a) the employee's reputation is damaged by public knowledge of false allegations relating to the termination, (b) the employer fails to take reasonable corrective steps and offers no reasonable excuse for such failure, and (c) the damage to the employee's reputation has impaired his ability to find new employment.
To review the Wallace principles, you can find the decision here, or look at the excerpts quoted in the Tipple case at paragraph 15. This should not necessarily be read as an endorsement of Wallace as current law (Wallace was superceded by the Supreme Court of Canada's Decision in Keays); rather, this decision simply reflects that where an employer plays a direct or indirect role in causing harm to an employee's reputation, the employer may be liable for damages caused by its conduct.
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