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Playing nice: How to avoid punitive awards

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My mother always told me to play nice. I recall that simple but sage advice when I encounter employers behaving badly (“EBBs”, as I call them). EBBs are employers that act without regard to: a) basic employer obligations, and/or b) common decency vis-à-vis their employees. As revealed by the case law over the years, the EBB playbook can include:

When their conduct comes before the courts, EBBs can expect to face harsh penalties for their misdeeds. Beyond the legal costs and bad publicity associated with litigation, a court may – in addition to ordering the payment of compensatory damages – also award punitive damages against the employer.

What are Punitive Damages?

Most damages awarded by the courts – for example, wrongful dismissal damages – are intended to compensate a plaintiff for actual losses incurred (e.g. the loss of wages during the reasonable notice period). In contrast, punitive damages are a monetary penalty imposed by a court to (as the name implies) punish a defendant for its behaviour.

In the recent wrongful dismissal decision in Boucher v. Wal-Mart Canada Corp., the Ontario Court of Appeal confirmed that in order to obtain a punitive damages award, an employee must establish that:

  1. the employer’s conduct is reprehensible, meaning that it is “malicious, oppressive and high-handed” and that it reflects “a marked departure from ordinary standards of decent behaviour”;
  2. notwithstanding any other compensatory award (e.g. wrongful dismissal damages), the punitive damages award is “rationally required to punish the [employer] and to meet the objectives of retribution, deterrence and denunciation”; and
  3. there is an “independent actionable wrong” that was committed by the employer aside from the wrongful dismissal itself (e.g. breach of duty of good faith and fair dealing, intentional infliction of mental distress, etc.).

How Much Can a Court Award in Punitive Damages Against an Employer?

In the original trial decision in Boucher, the jury awarded $1,000,000 in punitive damages against the employer.

In the recent appeal of the trial decision, the Ontario Court of Appeal agreed that the employer’s conduct was “reprehensible” because it: (i) refused to take the plaintiff employee’s complaints about her supervisor seriously, (ii) concluded that the employee’s complaints were not substantiated, despite significant evidence that they were valid, (iii) failed to discipline the supervisor, (iv) engaged in reprisal against the employee, and (v) did not abide by its own policies. Although the Court of Appeal upheld the trial judge’s finding that punitive damages were warranted, it ultimately reduced that award to $100,000.

In the 2011 decision in Pate Estate v. Galway-Cavendish and Harvey (Townships), the trial judge awarded $550,000 in punitive damages, on the basis that the employer had engaged in “significant misconduct”, including spearheading criminal proceedings against the employee, over a period of more than ten years.  The judge determined that the employer’s “intentional” actions had “a devastating impact” on the employee, including on “his employability [and] his marriage.” Although the Ontario Court of Appeal subsequently reduced that punitive damages award, the former employee (who, incidentally, had passed away prior to the appeal) was still awarded $450,000.

Despite the fact that the Ontario Court of Appeal reduced the punitive damage awards in both cases, it is significant that: a) these damages were awarded in the first place, and b) the final (post-reduction) quantum was still so high in both cases. Accordingly (and, with the World Cup upon us, to borrow a phrase from the soccer lexicon), these decisions should stand as a “yellow card” to employers.

What Can an Employer Do to Avoid a Punitive Damage Award?

While it is common for employees to include a claim for punitive damages in a wrongful dismissal claim, it is rare that such an award is warranted. For example, in the recent Ontario decision of Diamantopoulos v. KPMG LLP, the court refused to award punitive damages to an employee following a termination. While the employee alleged that she was mistreated and even blamed her subsequent breast cancer diagnosis on the employer’s actions, the judge found that the employer showed “courtesy, respect, fairness and sympathy” throughout the plaintiff’s employment and in the manner of termination. Specifically, the judge found that the employer held a meeting to discuss complaints about the employee’s behaviour, which was a “humane and professional way to communicate a reasonable message to an employee who needed and deserved such admonition in order to…modify her inappropriate behavior”. In addition, the employer set aside the employee’s termination after it received new information that she had recently been diagnosed with cancer, and permitted her to make subsequent short and long-term disability claims.

To avoid the risk of drawing a “red card” and paying a punitive damage award, employers should not take any pages from the EBB playbook, and should instead (by way of example) adhere to the following:

  • address employee complaints in a fair and balanced manner;
  • conduct termination meetings as humanely as possible, and give due consideration to the employee’s immediate needs of exiting the building without a “walk of shame”, travelling home, searching for alternative employment and applying for employment insurance;
  • ensure that minimum statutory entitlements are paid upon termination; and
  • continue benefits for as long as possible (with regard to the reasonable notice period) following a termination.

Stated simply, employers who play nice will reap rewards (or should at least avoid punishment and a reprimand from my mother).

Jennifer Heath