In the recent Taylor v. British Columbia, 2026 BCSC 1047, the Supreme Court of British Columbia awarded the plaintiff, a former public servant, $50,000 in aggravated damages and $200,000 in punitive damages after finding that the Province of British Columbia (the “Province”) acted in bad faith during the plaintiff’s termination and improperly used her as a political “scapegoat” in response to the fallout from the Ministry of Health “Misfire” controversy.
The decision is noteworthy for two reasons. First, the Court confirmed that an employer cannot withhold severance payments in exchange for a release when the employee is otherwise entitled to severance. Second, the Court held that a public employer terminating an employee due to politically sensitive public controversy and using the employee to absorb public blame for governmental failures amounts to bad faith and attracts aggravated and punitive damages.
Background
Wendy-Lou Taylor worked for the Province for approximately 30 years and served as the Director of Privacy Investigations. She was involved in the Ministry of Health data-breach investigation that led to the Misfire controversy, the dismissal of several government employees, and significant political fallout. Although public reporting often portrayed Ms. Taylor as the lead investigator, the evidence demonstrated that she was a member of a broader investigative team and lacked ultimate decision-making authority.
On June 29, 2017, the Province terminated Ms. Taylor’s employment on a without cause basis, shortly before publicly announcing payments related to the Misfire Report. The Province offered severance only if Ms. Taylor signed a release. When she refused, the Province withheld payment for approximately 15 months.
The Court’s Findings
Indicators of Bad Faith Conduct when Terminating Employment
Employers owe a duty of good faith when terminating employment. Applying the two-part test in Hrynkiw v. Central City Brewers & Distillers Ltd., 2020 BCSC 1640, the Court considered if the Province breached the duty of good faith when terminating Ms. Taylor and if Ms. Taylor suffered compensable damages as a result.
When assessing whether the Province engaged in bad-faith conduct, the Court emphasized that bad-faith conduct may include attacks on an employee’s reputation and may encompass conduct occurring before and after termination where it forms part of the overall manner of the termination of the employee. The Court reaffirmed that contractual rights, including termination rights, cannot be exercised dishonestly. Dishonesty may include silence, omissions, half-truths, or knowingly misleading conduct by the employer.
Withholding Severance breaches duty of good faith and contractual obligations
The Court found that the Province withholding Ms. Taylor’s severance for approximately fifteen months solely because she refused to execute a release in favour of the Province was a breach of the regulation and the Province’s contractual obligations.
Once the Province exercised its discretion under the Employment Termination Standards, B.C. Reg 379/97 to provide severance to Ms. Taylor, it could not impose additional conditions on the severance payment, other than the amount of the payment.
Timing, execution, and manner of termination can amount to Bad Faith Conduct
The Court rejected the Province’s assertion that the termination of Ms. Taylor’s employment was unrelated to the government’s response to the Misfire Report. The timing was particularly noteworthy, as Ms. Taylor’s employment was terminated fifteen minutes before goodwill payments were announced in response to the Misfire Report. The Court found the more plausible explanation for the timing was that the government wished to publicly communicate that the persons responsible for the controversy were no longer employed by the Province.
Exercise of the power imbalance in the employment relationship can attract Punitive Damages
Relying on Whiten v. Pilot Insurance Co., 2002 SCC 18, the Court confirmed that punitive damages are exceptional and reserved for high-handed, malicious, arbitrary, oppressive, or highly reprehensible misconduct that warrants denunciation, deterrence, and retribution.
Here, it was found that the Province’s conduct was egregious because the Province knew that the public reporting inaccurately blamed Ms. Taylor for major decisions that she did not make. Ms. Taylor, as a public servant, was limited in her ability to respond to media reports about her. The Province took advantage of this power imbalance by making Ms. Taylor its political “scapegoat”.
The Court’s Decision
The Court held that the Province’s conduct breached its duty of good faith and fair dealing when they terminated Ms. Taylor’s employment and withheld her severance. The Court further found that Ms. Taylor established mental distress, reputational harm, depression, humiliation, loss of community, and professional consequences that exceeded the ordinary emotional upset associated with a termination of employment.
As a result, the Court awarded Ms. Taylor: $50,000 in aggravated damages for bad-faith conduct and reputational harm; and, $200,000 in punitive damages to punish and denounce the Province’s conduct.
Implications for Employers and Employees
Taylor offers several important takeaways for both employers and employees:
- Employers Cannot Use Severance Payments as Leverage for a Release: Where severance is owed, an employer cannot withhold payment simply because an employee refuses to execute a release. Once severance is payable, the employer must comply with the statutory framework under applicable employment laws and legislation.
- Public “Scapegoating” Can Constitute Bad-Faith Dismissal: An employer breaches its duty of good faith when it knowingly allows an employee to bear public blame for institutional failures and then structures the employee’s termination to capitalize on that misperception.
- Reputational Harm attracts Aggravated Damages: Where a termination of employment may damage an employee’s reputation, cause significant stigma, and/or impair future opportunities, aggravated damages may be awarded even in the absence of medical evidence.
- Governments Are Subject to the Same Good-Faith Obligations as Other Employers: The public-sector context does not insulate an employer from liability. Public sector employers are held accountable for using power imbalances and public communication advantages against a public servant who cannot defend themselves publicly.
- Significant Punitive Damages are Available in Employment Cases: The $200,000 punitive damages award demonstrates that Canadian courts are prepared to impose substantial punitive awards where employer misconduct is deliberate, politically motivated, oppressive, and deserving of denunciation.
How Our Calgary Employment Group Can Help
Our Calgary Employment team is well versed in providing legal guidance and advice to both employees and employers in circumstances of wrong dismissal, and in general legal issues affecting the workplace. We handle dismissal, harassment, discrimination, human rights, and workplace investigations. We have an experienced group of employment and civil litigators that can assist and tailor our services to meet your needs.
Should you have questions on an employment matter, please feel free to reach out to any member of our team and we would be happy to assist you.