Can a portion of the amount to be received on settlement of a wrongful dismissal action, be treated as tax-free damages received as a consequence of a Human rights violation?
Position: Question of fact.
The information provided to us indicates that the agreed settlement was reached by the parties to settle the taxpayer's claim that, as a result of the employer's discriminatory treatment of the employee, the employer had violated subsection 13(1) of the Human rights Code 1996 RSBC Chapter 210. The particulars of the claims submitted to us provided significant details of the alleged actions of the employer that preceded the employee's apparent termination. Based on this information it was not clear to us that a violation of the above noted section of the Act had occurred. However, it seemed clear that a personal injury did occur and that it was related to the employee's treatment while employed such that a strong case could likely be established that the damage payment would be to settle a human rights violation. Accordingly, we concluded that we could likely accept that a portion of the amount could be treated as tax free damages. We noted that we understood that the awards generally provided by the B.C. Human Rights Tribunal fell between $2,500 and $4,000 and that the largest award for general damages ever provided was $7,500.