Counterclaim and exemplary damages

Counterclaim and Exemplary Damages in Employment Litigation

In the world of employment litigation, the terms “counterclaim” and “exemplary damages” carry significant weight and importance. They represent critical aspects of the legal landscape that can greatly impact the outcome of a case. In this blog post, we will delve deep into these concepts, providing you with a comprehensive understanding of what they entail and how they can be utilized in various legal scenarios.

What is a Counterclaim?

A counterclaim is a legal response by a defendant in a lawsuit. It serves as a strategic defense mechanism that allows the defendant to assert their own claims against the plaintiff. In essence, it’s a legal offensive launched in response to the initial lawsuit. Counterclaims are not limited to any specific area of law and can cover a wide range of issues.

In Ontario, the manner in which an employee is dismissed can open an employer up to further damages for bad-faith conduct. Employers should ensure they are adhering to what is known as the “duty of good faith and fair dealing”, both during and after the employee’s dismissal—this includes in the manner the employer deals with receiving a claim.

What Are Exemplary Damages?

Exemplary damages, also known as punitive damages, are a form of compensation awarded to a plaintiff in addition to their actual losses. Unlike compensatory damages, which aim to reimburse the plaintiff for their losses, exemplary damages serve a different purpose altogether. They are designed to punish the defendant for particularly egregious conduct and deter similar behavior in the future.

What Is Bad Faith Conduct? 

Bad faith refers to dishonest or deceptive behavior characterized by a lack of honesty, fairness, or sincerity in a person’s actions, dealings, or intentions. It implies that an individual or entity is acting with ill intentions or knowingly engaging in deceitful or unethical practices.

In employment relationships, bad faith can occur when an employer engages in unfair or deceptive practices, such as wrongful termination, discrimination, or harassment, with the intention of causing harm or violating employee rights.

Case Summary: Ruston v Keddco MFG (2011) Ltd, 2019 ONCA 125


The case Ruston v Keddco MFG (2011) Ltd, 2019 ONCA 125 involved an employment dispute between the plaintiff, Mr. Ruston, and his former employer, Keddco MFG (2011) Ltd. Mr. Ruston claimed that he had been wrongfully terminated from his employment and sought compensation.


In this case, the Ontario Court of Appeal (ONCA) reviewed the circumstances surrounding Mr. Ruston’s termination. The court considered various factors, including the terms of Mr. Ruston’s employment contract, the reasons provided by the employer for the termination, and whether the termination was conducted in good faith.

The ONCA found that Mr. Ruston’s employment contract did not contain a specific termination provision that limited his entitlement to notice or severance pay. As a result, Mr. Ruston was entitled to common law reasonable notice upon termination. The court emphasized that employees in Canada are generally entitled to reasonable notice or pay in lieu of notice unless their employment contract clearly specifies otherwise.

The court also examined the conduct of Keddco MFG (2011) Ltd. during the termination process. It concluded that the employer had not acted in good faith and had failed to provide Mr. Ruston with a proper termination letter or reasonable notice. As a result, the court awarded Mr. Ruston compensation for wrongful dismissal.

Meaning for Employers

The case Ruston v Keddco MFG (2011) Ltd, 2019 ONCA 125 serves as a reminder to employers in Ontario and throughout Canada about the importance of clear and enforceable employment contracts. Key takeaways for employers include:

  • Clarity in Employment Contracts: Employers should ensure that employment contracts clearly specify the terms of employment, including termination provisions. Unclear or ambiguous contract terms can lead to disputes and increased liability for employers.

  • Good Faith Termination: Employers have a duty to act in good faith when terminating employees. This includes providing reasonable notice or pay in lieu of notice and following proper termination procedures.

  • Compliance with Employment Standards: Employers should be aware of and comply with relevant employment standards legislation. Failure to do so can result in legal consequences.

  • Seek Legal Advice: When making employment decisions, including terminations, employers should seek legal advice to ensure compliance with applicable laws and to minimize legal risks.

It’s important for employers to understand their legal obligations regarding terminations and to have employment contracts that align with those obligations to avoid costly disputes like the one in this case.

Contact Achkar Law

If you are an employer  and want to know how to properly dismiss an employee or how to properly defend to a claim, or an employee who has questions about their dismissal, our team of experienced legal professionals at Achkar Law can help.

Contact us by phone toll-free at 1 (800) 771-7882.

Resolve Your Employment Disputes with Achkar Law

Resolving employment disputes requires careful legal analysis and strategic action. At Achkar Law, our experienced team provides comprehensive support to handle a variety of employment litigation issues. Whether you are an employer or an employee, we ensure that your legal rights are protected and work towards achieving the best possible outcomes in disputes such as wrongful dismissal, discrimination claims, or contract disagreements.


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