After the taxpayer was wrongfully dismissed, an arbitrator ordered that the taxpayer be reinstated and be paid his back pay. The corporate employer wrongfully refused to reinstate the taxpayer, and the taxpayer obtained a court order for damages, reimbursement of legal costs and interest.
The Directorate noted its administrative position (which was changed for orders or out-of-court settlements dated on or after January 1, 2004) was that pre-judgment interest relating to wrongful dismissal awards was not taxable, and that for out-of-court orders or settlements dated on or after January 1, 2004, it will be taxable.