How General Damages Work in HRTO & Settlement Cases (And How They Impact Your Final Payout)

When someone experiences discrimination, harassment, or unfair treatment, the harm is often more than just financial. The emotional toll—the stress, the anxiety, the impact on your dignity—can be just as devastating, if not more.

That’s where general damages come in.

If you’ve faced workplace discrimination, harassment at school, denial of services, or mistreatment in housing, healthcare, or public spaces, part of your compensation may include general damages—a form of financial recognition for what you went through. And the way this money is categorized matters. A lot.

What Are General Damages?

General damages are meant to compensate for dignity, feelings, and self-respect in human rights and other discrimination claims. Unlike lost wages or financial damages, this isn’t about what you lost—it’s about what happened to you.

Examples of When General Damages May Apply:

• Workplace harassment and discrimination: Being targeted because of your gender, race, disability, pregnancy, or other protected grounds

• Discrimination in services: A school failing to accommodate your child’s disability or a business refusing to serve you based on race, religion, or gender identity

• Housing discrimination: Being denied an apartment because of your family status, race, or disability

• Public spaces and transportation: Facing harassment or exclusion on a bus, in a store, or at a public event

This isn’t about financial loss but about human loss. And the law recognizes that.

Why General Damages Matter

• They are tax-free. Unlike lost wages or severance, general damages are not taxed in Canada.

• They do not appear on a T4. You won’t see them listed as employment income, because they’re not.

• They can increase your take-home amount. Because they are tax-free, general damages can mean up to 30% more in your pocket compared to other settlement amounts.

How General Damages Affect Your Final Payout

When structuring a settlement, it’s important to understand the difference between general damages and taxable compensation like lost wages or severance.

In employment cases, if part of your settlement is categorized as a retirement allowance (compensation for lost wages), it is taxable at the following CRA rates:

• First $5,000: 5%

• $5,001 - $15,000: 10%

• Over $15,000: 30%

These tax rates do not apply to general damages—meaning if part of your settlement can be structured as general damages, it won’t be taxed at all.

Example: Taxable vs. Tax-Free Settlements

Let’s say you receive a $30,000 settlement:

If it’s categorized as a retirement allowance (taxable):

• The entire $30,000 is taxed at 30%

• Total tax withheld = $9,000

• Your take-home amount = $21,000

If it’s categorized as general damages (tax-free):

• No tax deductions

• Your take-home amount = $30,000

By structuring your settlement correctly, you could keep thousands more.

How Do You Know If General Damages Apply to Your Case?

General damages may apply if your claim involves:

• Discrimination, harassment or assault

• Human rights violations at school, in services, housing, or public spaces

• Reprisal for standing up for your rights

If your claim involves lost wages, some of your settlement may be taxable, but part of it may still be structured as general damages. Every case is different.

Why This Matters

I see this confusion all the time: people assume all settlements are taxed the same way. They’re not. And understanding how your case is structured can mean the difference between losing thousands to taxes or keeping the full amount you deserve.

Before settling, make sure you discuss whether part of your payout can be allocated as general damages. It could mean thousands more in your pocket.

Next Steps:

Check out our infographic below for a visual breakdown of general damages and tax withholding on settlements.

Need legal guidance? Book a consultation here to discuss your case.

The above infographic explains the basics of general damage awards.