Damages for Mental Distress in the Employment Context: Potential Impact of Charlton v. Ontario

By Jo-Anne Pickel

The Ontario Ministry of Correctional Services was ordered to pay $20 000 in damages for mental distress caused by racial harassment in Charlton v. Ontario, [2007] O.P.S.G.B.A. No. 4. The decision follows on the heels of the latest Ontario Human Rights Tribunal decision in McKinnon v. Ontario released earlier this year which condemned the Ministry for its failure to address systemic racism in correctional workplaces. Just as the McKinnon decisions have expanded the arsenal of legal remedies available to address persistent discrimination and harassment, Charlton v. Ontario provides an additional basis on which unions and employees can claim damages for mental distress at arbitration in egregious cases of workplace discrimination and harassment.

A. Facts in Charlton v. Ontario

The case of Charlton v. Ontario proceeded on an agreed statement of facts. According to this agreed statement, Ms. Charlton, a Black woman of African decent, was employed as a Correctional Officer at the Toronto Jail. In 2005, Ms. Charlton received an anonymous letter at her home containing racist and inappropriate content. She was one of several unionized and non-unionized employees to receive such a letter. As a result of the letter, Ms. Charlton suffered mental stress and had to go off of work and collected Workplace Safety and Insurance Benefits (WSIB). At the time of the decision in 2007, Ms. Charlton had been unable to work since October 15, 2005. Although Ms. Charlton was not covered by a collective agreement, she was entitled, under the Public Service Act, to refer a grievance on her own behalf to the Ontario Public Service Grievance Board (OPSGB).

B. Board’s Decision

The Board, chaired by Donald Carter, ordered the Ministry to Corrections to pay $20,000 for mental distress arising from the breach of what it found was an implicit contractual guarantee of freedom from racial harassment in the workplace.

1. Implicit Guarantee of Harassment-Free Workplace

The Board ruled that the Human Rights Code’s guarantee to freedom from racial harassment was a term in Ms. Charlton’s employment contract with the Ministry for two reasons. First, section 26 of the Code in effect provides that any contract entered into by the Crown is deemed to contain a provision requiring that it be performed without any employment-related discrimination. The Board ruled that this provision was broad enough to encompass contracts between the Crown and its own employees. Second, the Board ruled that the Code’s guarantees are implicitly incorporated into individual employment contracts between the Crown and its employees pursuant to the Supreme Court of Canada’s decision in Parry Sound Social Services Administration Board v. OPSEU (2003), 230 D.L.R. (4th) 257 (S.C.C.).

2. Damages for Mental Distress

Once having found that Ms. Charlton’s employment contract contained an implicit guarantee to freedom from harassment, the Board concluded that it had the jurisdiction to remedy the harassment she suffered. Significantly, the Board found that it not only had jurisdiction to compensate Ms. Charlton for her financial losses but also for the mental distress she suffered as a result of the breach of the term guaranteeing a harassment-free workplace.

The question of whether damages should be awarded for mental distress flowing from a breach of contract is one that has undergone significant changes in recent years. Prior to the Supreme Court of Canada’s decision in Fidler v. Sun Life Assurance Co. of Canada [2006] S.C.J. No. 30, such damages were only available where an individual could make out an independent cause of action (e.g. that a tort was committed in addition to the breach of contract). The Court in Fidler expanded the circumstances in which mental distress damages could be awarded. The Fidler case involved an insurance company’s improper denial of LTD benefits to a disabled employee. The Court ruled that , even in the absence of an independent cause of action, mental distress damages could be ordered where there has been a breach of a contract that created the expectation of a “psychological benefit”. That is, mental distress damages are not dependent on egregious conduct on the part of the person breaching the contract; they are intended to remedy the failure to deliver the psychological benefit promised by the contract.

In Charlton v. Ontario, the Board applied this reasoning to find that the implicit contractual guarantee to a harassment-free workplace created an expectation of psychological benefit. As such, the mental distress caused by the breach of this term could properly be compensated by damages. Given the substantial disruption to Ms. Charlton’s life and peace of mind, the Board granted the same quantum of damages awarded in the Fidler decision: $20 000. The Board concluded that the Human Rights Code’s $10 000 cap on mental anguish damages did not apply since the damages stemmed, not from the Code directly, but from the breach of Ms. Charlton’s employment contract.

C. Likely Impact of Charlton v. Ontario Decision

It remains to be seen what impact the Charlton v. Ontario decision will have on arbitral, human rights, and wrongful dismissal cases. However, the decision raises many important issues to be considered by those representing employees.

1. Implicit Guarantee to Discrimination and Harassment-Free Workplace

Since the Charlton v. Ontario case is an Ontario Public Service Grievance Board case, Chair Donald Carter’s reasoning likely would apply to collective agreements. That is, an arbitrator likely would find on the basis of the Charlton case that there is an implicit guarantee to a harassment free workplace in collective agreements. This conclusion flows from the fact that Parry Sound, the decision relied upon by the Chair Carter for this implicit provision in Charlton was a case involving the application of a collective agreement. As well, the conclusion is consistent with the decision of Arbitrator Shime in TTC v. ATU (2004),132 L.A.C. (4th) 225 where he found, inter alia, that it is implicit term of a collective agreement that the direction of the workforce be exercised in a non-abusive and non-harassing manner.

Moreover, there is no reason why only guarantees against racial harassment would be implicitly incorporated into individual employment contracts. A good argument can be made that Charlton has the same effect on individual employment contracts as Parry Sound had on collective agreements – that is, all protections found in the Human Rights Code should now be considered implicitly incorporated into individual employment contracts.

2. Contractual Terms Giving Rise to Mental Distress Damages

It is unclear from the Charlton v. Ontario case which terms (explicit and implicit ) of an employment contract or collective agreement will create an expectation of a psychological benefit and thus, if breached, give rise to mental distress damages. The Board in Charlton noted that not all terms and conditions of employment create the expectation of a psychological benefit and mental distress damages. There is certainly an argument based on Fidler that an employer’s breach of a disability benefits provision in an employment contract or collective agreement may give rise to mental distress damages. It will be left to future cases to determine whether provisions relating to salary, seniority, or other benefits are intended to provide a psychological benefit and, if breached, give rise to mental distress damages. It may also be argued that the implicit guarantee of reasonable notice of termination in individual employment contracts is intended to create an expectation of a psychological benefit that, if breached, would give rise to mental distress damages.

D. Conclusion: Making Sense of the Different Heads of Damages

The variety of heads of damages that may be claimed is often confusing to human rights advocates, unions, and employees. The following heads of damages should be considered when drafting complaints and grievances in cases involving human rights violations:

i. General damages: compensate for the intrinsic value of the complainant’s rights under the Human Rights Code. They may include damages for loss of dignity and self-respect.

ii. Special damages: compensate for specific tangible losses arising from the infringement of a complainant’s rights (e.g. lost salary and benefits, etc.)

iii. Damages for mental anguish: to compensate for wilful or reckless infringements of the Human Rights Code that cause mental anguish. The present cap on these damages in the Code is $10 000. This cap will be removed when amendments to the Code are proclaimed on June 30, 2008.

iv. Damages in tort: damages to remedy an employer’s tortious conduct (see for example, Pacific Press and C.E.P., Loc. 115-M (Velestuk) (Re) (1998), 73 L.A.C. (4th) 35 where the arbitrator found the employer responsible for committing the tort of intentional infliction of emotional suffering.)

v. Aggravated/Punitive damages: These damages are rarely awarded in civil cases, even more seldom awarded in arbitration cases, and almost never awarded in human rights tribunal cases. However some courts have awarded punitive damages in cases where an employer has acted in bad faith or in a high-handed manner (see for example, Keays v. Honda (2006), 274 D.L.R. (4th) 107 (Ont. C.A.) on appeal to SCC). There is a division of opinion in the arbitral caselaw as to whether arbitrators have the jurisdiction to award aggravated and punitive damages in appropriate cases. In O.P.S.E.U. v. Seneca College (2006) 267 D.L.R. (4th) 509, the Ontario Court of Appeal upheld as “not patently unreasonable” an Arbitration Board’s finding that the O.P.S.E.U. collective agreement in question did not provide it with the power to award aggravated and punitive damages for tort-like conduct. However, in our view, the issue of aggravated and punitive damages in arbitrations is still a live issue, depending on the circumstances in particular cases.

vii. Damages for breach of contractual term providing expectation of psychological benefit: Following Charlton v. Ontario, unions and employees may consider claiming damages for mental distress arising from the breach of a term of a collective agreement or employment contract that creates the expectation of a psychological benefit. It is unclear how likely arbitrators or courts will be to award such damages in the future or in what circumstances.

The types of damages that are likely to be awarded in any particular case will depend on the facts of the case, the seriousness of the human rights violation, and the forum in which the case is being heard. In the case of grievances, the OPSGB's decision in Charlton is a sign that labour arbitrators are considering human rights damages more readily. In appropriate cases in both the unionized and non-unionized context, unions and other advocates should add a ground alleging the breach of contractual term providing expectation of psychological benefit.