8 October 1996 T.I. 962701 (C.T.O. "Loss of Employment, Mental Distress, Damages")

"Generally ... payments made by an employer to an employee in connection with the loss or termination of employment, whether or not received as damages or pursuant to an order of a competent tribunal, are characterized as a retiring allowance... . To the extent that damages which are awarded by a Human Rights Tribunal, or on a settlement in lieu thereof, do not relate to the loss of employment but relate solely to damages arising from a human rights violation, such damages are not required to be included in income. The reimbursement of legal costs do not form part of a retiring allowance but such amounts are taxable under paragraph 56(1)(l.1)...".

Although reimbursement of legal costs incurred in a wrongful dismissal action are taxable under s. 56(1)(l.1), a contingency fee payable by a client to his or her legal counsel is not an "award or reimbursement in respect of legal expenses" and, instead, is included in employment income under s. 56(1)(a)(ii), to the extent that the damages relate to the loss of employment.

Reimbursements of the legal fees incurred in a wrongful dismissal action are not "remuneration".