If an employer falsely alleges fraud as cause for termination, should the dismissed employee be entitled to an extension of the notice period; some form of moral and/or punitive damages; or both?
Twenty years ago, an Old El Paso commercial featured a young girl attempting to settle a dispute between her siblings over whether the family should have soft or hard taco shells. Her solution? “Por qué no los dos?” Or, “Why not have both?”
I found myself asking the same question when discussing Wilsher v. Olympic Wholesale, 2026 ONSC 3620 (CanLII), on a recent episode of Water Cooler Justice. In that case, the Honourable Justice S. Woodley awarded a dismissed employee 19 months’ pay in lieu of notice, plus a further 14 months for the employer’s bad faith. The court declined to award aggravated or punitive damages.
The problem? The Supreme Court of Canada abandoned the “Wallace bump” in 2008. But does that mean an employer’s unfounded allegation of fraud can never justify both a longer reasonable notice period and a separate damages award? I do not think so.
Facts
Terry Willsher was 55 years old when Olympic Wholesale Company Limited terminated his employment on October 5, 2023. He had worked for the Ajax food distributor for 17 years, most recently as its Night Shift Supervisor. He earned approximately $62,000 annually, plus benefits, and had an unblemished disciplinary record.
Olympic alleged Willsher had given it “cause” to terminate his employment. Specifically, it accused Willsher of fraud and time theft for “topping up” warehouse employees’ hours, including when they had completed their work and left before the end of their shift.
There was a rather significant problem with that allegation: the practice predated Willsher’s promotion, had been used by other supervisors, and continued after his dismissal. He had learned it by shadowing another supervisor. Olympic had provided no written policy or training prohibiting it. Willsher understood that the practice reflected the unionized employees’ guaranteed 40-hour workweek.
Moreover, Willsher did not personally benefit. He used his own credentials to make the changes, leaving a readily identifiable record. Three current employees corroborated his account.
Olympic nevertheless conducted an investigation focused on Willsher, without auditing the other supervisors’ edits or asking them about the practice. Following a confrontational meeting, it dismissed him for fraudulent activity, without notice or pay in lieu. His replacement was later dismissed for the same practice.
Willsher sued. He remained unsuccessful in finding replacement employment despite his job search. He testified that being labelled a thief, coupled with having no reference from his employer of 17 years, impaired his prospects.
Decision of the Ontario Superior Court
Justice Woodley rejected Olympic’s allegation of cause. The court found that the challenged practice was institutional, transparent, and consistent with the training Willsher had received. It also rejected the allegation that he had lied or attempted to conceal fraud. As the court observed at paragraph 79:
[79] The meeting between Willsher, Peroff, and Sousa on October 5, 2023, was conducted in a high-handed, unfair, and unbalanced manner. Willsher was ambushed by management and interrogated without notice, without context, without representation, and without regard for his unblemished 17-year employment record with Olympic.
Turning to notice, the court considered Willsher’s age, service, supervisory role, and employment prospects. Importantly, at paragraph 123, it expressly connected his continued unemployment to Olympic’s allegations:
[123] In the present case, Willsher was 55 years of age and had been employed for 17 years by Olympic. He was a Night Shift Supervisor for 8 of those 17 years. Due to allegations of “theft” and “fraudulent activity” Willsher was unable to secure alternate employment after he was terminated by Olympic, despite his appropriate attempts to mitigate his losses.
The court fixed reasonable notice at 19 months. It then addressed an additional extension, relying on Wallace and McKinley. At paragraph 126, Justice Woodley wrote:
[126] Where a dismissal is accompanied by bad faith or unfair dealing on the part of the employer, the court has established that such conduct merits compensation by way of an extended notice period (see: McKinley, at para 74).
The court identified the targeted investigation, intimidating termination meeting, fraud accusation, absence of references, and resulting difficulty finding work as supporting an extension. It concluded:
[130] Despite attempts to secure new employment, Willsher has been unable to find a new job and has suffered embarrassment and humiliation at the hands of Olympic. In these circumstances, Willsher is entitled to damages in the form of an extended notice period extended to the date of release of this decision which equates to a further 14 months’ notice, for a total notice period of 33 months.
Aggravated damages were declined:
[132] Having considered the issue of aggravated damages, I am of the view that the actions of Olympic in terminating the employment of Willsher do not rise to the level of aggravated damages. Damages in the present case more properly warrant an extension of the notice period, which has been granted.
As were punitive damages:
[138] Having considered the issue of punitive damages, I am of the view that the actions of Olympic in terminating the employment of Willsher do not rise to a level that would warrant punitive damages. Again, damages in this case warranted in an extension of the notice period, which has been granted.
The court also ordered correction of the Record of Employment and awarded costs, subject to any offers to settle. It left calculation of the monetary judgment to counsel.
Commentary
What year is it?
That was essentially my initial reaction on the podcast. Honda Canada Inc. v. Keays, 2008 SCC 39, was decided 18 years ago. Its direction at paragraph 59 could hardly be clearer: damages for bad faith in the manner of dismissal are awarded “not through an arbitrary extension of the notice period, but through an award that reflects the actual damages.”
Honda does not appear in these reasons. In my respectful opinion, using a Wallace bump to compensate for embarrassment and humiliation was an error.
That does not mean the employee received an economically outrageous result. As I said on Water Cooler Justice, I have no particular difficulty with 19 months’ notice on these facts. Nor would an award of $40,000 in moral damages have caused me to fall out of my chair, assuming the necessary evidence and findings. That is my assessment of a possible award, not an award the court made.
The method matters, however. Measuring injury in months of salary makes an identical period worth far more to a highly paid executive than to a lower-paid employee. The employee’s paycheque does not measure the seriousness of the employer’s bad faith or the resulting distress.
There is also a second issue. While Honda prevents courts from adding months as compensation for bad faith, it does not require them to ignore an employer-created obstacle to finding another job.
For 66 years, Bardal v. Globe & Mail Ltd., 1960 CanLII 294 (ON SC), has directed courts to consider the availability of similar employment, having regard to the employee’s experience, training, and qualifications. Availability is not simply a question of how many jobs appear on Indeed. It also concerns this employee’s prospects of obtaining comparable work.
Consider the practical problem. After 17 years with one employer, an employee is looking for a new supervisory job without a reference. Why did the last job end? The employer says fraud. Who is going to hire that person to supervise employees or oversee payroll?
That employee has a longer road to walk.
There is appellate authority for considering that problem. In Lin v. Ontario Teachers’ Pension Plan, 2016 ONCA 619, at paragraphs 52–55, the Court of Appeal upheld selection of 15 months at the upper end of a 12-to-15-month range because dismissal under an ethical cloud impaired the employee’s prospects. As paragraph 53 explains, the trial judge “did not determine an appropriate period of reasonable notice, and then increase the period as a result of bad faith conduct”. The distinction was between assessing the time reasonably required to find comparable work and awarding damages for bad faith irrespective of that time.
Closer still is Ruston v. Keddco MFG. (2011) Ltd., 2019 ONCA 125. The Court of Appeal upheld 19 months’ notice, $25,000 in moral damages, and $100,000 in punitive damages. Among the factors supporting notice were serious cause allegations and the absence of a reference. Paragraph 9 explains: “All of these factors affected the notice period because they made it less likely that Mr. Ruston would find employment”.
Ruston also confirms that moral and punitive damages can coexist because they serve different purposes. Its employer had used a $1.7 million counterclaim to intimidate the employee. Willsher’s case does not contain that same counterclaim, and the awards in Ruston cannot simply be transplanted. But the decision demonstrates that a notice assessment reflecting impaired employability does not preclude separate compensation for mental distress or punishment where justified.
There are limits to my argument. First, the reasons in Wilsher already mention the fraud allegations when arriving at 19 months. Those consequences cannot simply be counted a second time to justify another 14 months. A court would need to explain why the appropriate notice period, assessed as a whole, should be longer.
Second, 33 months is well beyond the usual range. In Lynch v. Avaya Canada Corporation, 2023 ONCA 696, at paragraph 10, the Court of Appeal reiterated that “generally only exceptional circumstances will support a base notice period in excess of 24 months”. Lynch upheld 30 months in exceptional circumstances involving a long-serving, older employee with highly specialized employment. Neither Lin nor Ruston establishes that a failed fraud allegation, by itself, justifies crossing 24 months. That would require a supported exceptional-circumstances analysis.
Third, reasonable notice is assessed at termination. Remaining unemployed at trial is relevant evidence, but the release date of the judgment is not itself the measure of reasonable notice.
Finally, moral and punitive damages require their own analysis. Moral damages compensate proven harm caused by bad faith in the manner of dismissal, beyond the ordinary upset of losing a job. Punitive damages punish exceptional misconduct where the other remedies are insufficient. A separate actionable wrong is required for punitive damages, although it need not be a separate tort: breach of the employer’s contractual duty of good faith can qualify. The court must consider the whole award and avoid double recovery or excessive punishment.
On the findings made here, I see a proper basis to consider moral damages and a serious argument for punitive damages. A targeted investigation followed by an unfounded fraud allegation deserves scrutiny under those tests. I disagree with treating an extended notice award as the answer to each question. The existence of notice damages does not settle whether further compensation or punishment is warranted.
My position is therefore not that the court should have awarded 33 months plus whatever other damages it fancied. It is that the law permits a longer notice period reflecting demonstrated difficulty finding comparable work, together with moral and/or punitive damages where their respective requirements are met.
Por qué no los dos?
Takeaways for Employers
Fraud is a serious allegation. Investigate the actual workplace practice, including what other supervisors do and what the employee was taught, before using it as grounds for summary dismissal. A practice does not become fraudulent merely because management says it did not know about it.
An unsuccessful, good-faith cause defence does not automatically attract moral or punitive damages. But an unfounded accusation can impair the employee’s prospects, support a longer notice assessment, and expose the employer to additional damages if the required misconduct and harm are proved. Notice pay does not purchase immunity from those consequences.
Takeaways for Employees
Being dismissed for alleged fraud does not establish that you committed it. Evidence of training, established practices, transparent records, and how other employees were treated can be critical.
Document your job search and the obstacles you encounter, including requests for references and questions about the dismissal. Keep evidence of any resulting mental distress as well. Difficulty finding work, injury caused by bad faith, and conduct warranting punishment raise different legal questions. Proving one does not automatically prove the others.
And do not assume that this decision makes 33 months the new normal. The Wallace bump has been gone since 2008. The better argument is grounded in Bardal, Lin, Ruston, and the evidence.
Sean Bawden: Experience. At Work.
I am an experienced employment lawyer and wrongful dismissal lawyer practicing across Ontario and beyond with Kelly Santini LLP, which is based in Ottawa.
For two and a half years I was in-house legal counsel providing employment law advice to one of Canada’s largest corporations and appeared in labour courts and tribunals literally the world over.
I have also been a part-time professor at Algonquin College and have taught Employment Law, Trial Advocacy for Paralegals, and Small Claims Court Practice. I am a past president (2024-2025) of the County of Carleton Law Association (“CCLA”), and have sat as a safe sport adjudicator.
I can be reached by email at sbawden@kellysantini.com or by phone at 613.238.6321 x233.
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As always, everyone’s situation is different. The above is not intended to be legal advice for any particular situation. It is always prudent to seek professional legal advice before making any decisions with respect to your own case.
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