Wallace Damages Law and Legal Definition
Wallace damages are the increased damages that are awarded for a wrongful dismissal because of the manner in which the dismissal was handled by the employer. Wallace damages compensated an employee who was submitted to “bad faith dismissal” maneuver of their employer. Wallace damages are named after the decision in Wallace v United Grain Growers 1997 Can. Sup. Ct. LEXIS 91, 2-3 (Can. Sup. Ct. 1997). In that case, the employer terminated Wallace’s employment without giving any notice. The employer also made serious allegations of fraud and communicated those allegations throughout the industry. Consequently, Wallace could not replace his income and he was eventually declared as bankrupt. When the trial began the company drew back the allegations. The Canada Supreme Court held that the employer used bad faith tactics in the manner of discharging Wallace which affected Wallace’s ability to replace his income. The Supreme Court stated that such conduct could lead to an extension of the reasonable notice period, and recognized the dismissals which occurred in bad faith. And, Wallace damage was awarded for the manner in which the dismissal was managed by the employer.
Later in Keays v. Honda Canada Inc. (c.o.b. Honda of Canada MFG),  O.J. No. 3891, the Court made out that Wallace damages can be awarded for mental distress, if one can prove this through medical evidence. The court further observed that Wallace damages can also be awarded for other objectively provable losses that are foreseeable by both parties at the time of entering into the employment contract. For example, in case of a loss in a book of business, Wallace damages will be awarded if the loss arises from the unfair and insensitive conduct of the employer at the time of termination.