Punitive damage award overturned in termination case

February 9, 2012

The Ontario Court of Appeal overturned a $15,000 punitive damages award arising from the callous manner in which a long-service employee was terminated. The trial judge’s decision was discussed in an earlier post (click here to review our summary of that decision). The Court of Appeal did not, however, consider the issue of whether the employer’s behaviour was sufficiently egregious to warrant an award for punitive damages. Rather, the basis for striking down the award was that the employee did not specifically request punitive damages in his pleadings, thus it was not open to the trial judge to make such an award.

Despite the fact that the punitive damages award was overturned in this case, the Court of Appeal reaffirmed the principle that an employer can effectively be required to step into the shoes of its insurer with respect to damages arising from lost long-term disability benefits in the event of wrongful dismissal. In this case, the damages awarded for the loss of such benefits were significant – the employee was awarded the value of the lost benefits up to his 65th birthday, which amounted to approximately $200,000. Accordingly, we reiterate our earlier advice on this issue which is that employers should ensure that employees are “made whole” upon termination without cause and, unless the employee has a well-drafted employment agreement that limits the employee’s entitlements to the statutory minimums, employees must be provided with reasonable notice of termination at common law. To avoid unnecessary liabilities to employees, we recommend entering into written employment agreements which specify employees’ entitlements upon termination, including any on-going entitlements to benefits.

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