Court of Appeal reduces "irrational" $550,000 punitive damages award in the context of a wrongful dismissal claim; $450,000 found to be sufficient

16 décembre 2013

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In a previous post, we discussed a case, Pate Estate v. Galway-Cavendish and Harvey (Townships), where a court awarded an employee who was wrongfully dismissed punitive damages of $550,000. That award was recently overturned, in favour of a reduction of the award to $450,000.

As previously described, the basis for this unusually high punitive damages award was the employer’s intentional and high-handed conduct which, according to the trial judge had a “devastating impact on the employee’s life, including his future employment prospects and broken marriage”. Specifically, the employer accused the employee of misconduct, including theft, which was not sufficiently supported by the evidence. The employer also selectively turned information over to police to support a criminal charge without providing the police with all of the relevant information in its possession.

At trial, in addition to punitive damages, the employee was awarded “Wallace damages”,  special damages, general and aggravated damages, as well as prejudgment interests and costs on a substantial indemnity basis. The employer only appealed the punitive damages award.

A majority of the Court of Appeal held that the trial judge “erred by failing to consider whether, in light of the total compensation and costs otherwise awarded to Mr. Pate, a lower quantum of punitive damages would satisfy the requisite objectives of retribution, deterrence and denunciation” and further stated that the punitive damages award was “irrational and excessive”. Accordingly, the Court of Appeal reduced the punitive damages award from $550,000 to $450,000. The Court did not explain its rationale for the $100,000 reduction.

In his lengthy dissent, Lauwers J.A., agreed that the punitive element of other damage awards should be taken into account in fixing an amount for punitive damages, but he found that there was no reason to doubt that the trial judge had done so.

Both the majority and the dissent agreed that a $550,000 punitive damages award was at the high end of the spectrum.

Our Views

Notwithstanding the reduction to the punitive damages award, this case still gives employers a reason to be cautious when alleging that an employee has engaged in misconduct akin to fraud sufficient to warrant termination of the employee’s employment for cause. Prior to doing so, employers should undertake a thorough investigation of all relevant facts and allow the employee an opportunity to respond to alleged misconduct prior to terminating the employee for cause.

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