Large punitive damages award cautionary tale for employers
A recent case awarding the largest punitive damages amount in Canadian employment law history should serve as a cautionary tale to employers who attempt to get out of their notice obligations, says Toronto employment lawyer Allison Greene.
The plaintiff in the case had worked at a B.C. sawmill for more than 30 years when he was fired without severance pay in 2009. He sued for wrongful dismissal, reportedly claiming a “bogus allegation of cause,” and that he was “terminated as an attempt to avoid paying severance to long-term employees.” The joint defendant companies argued they had just cause for dismissing the plaintiff.
Recently, a jury decided there was no cause for dismissal and awarded the plaintiff approximately $809,000 in damages following a three-week trial, including $236,000 in compensatory damages for wrongful dismissal and $573,000 in punitive damages as a result of the employer’s conduct.
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Generally speaking, says Greene, a partner with Karimjee Greene LLP, it is unusual for punitive damages to be awarded in wrongful dismissal cases because the threshold is quite high.
“The employer’s actions must have been so malicious and outrageous that they are deserving of punishment on their own. The focus is on the employer’s conduct, rather than the plaintiff’s damages. I think we’ll see more employees pursuing punitive damages when they have been terminated in a particularly egregious manner,” she adds.
A just cause defence, she says, is an all-or-nothing proposition. If the employer succeeds in proving cause, it has no obligation to provide notice or pay in lieu of notice to the employee. In the case of long-term employees who have a significant entitlement, employers can be tempted to roll the dice where they think that cause for termination existed, she explains.
“This case is a reminder that an employer who goes a step farther and drums up a specious cause allegation to avoid its obligations could end up paying far more than it would have had it simply provided the employee with reasonable notice,” Greene adds.
Greene says the purpose of punitive damages is to deter employers from engaging in reprehensible conduct.
“This case should serve as a cautionary tale to employers who attempt to get out of their notice obligations by either making the workplace so miserable that the employee quits or, failing that, by manufacturing cause allegations against the employee,” she explains.
Prior to this, says Greene the largest amount for punitive damages in an employment law case was awarded by the trial judge in Keays v. Honda Inc.
“That award of $500,000.00 was reduced to $100,000.00 by the Court of Appeal and wiped out altogether by the Supreme Court of Canada. It will be interesting to see if this award is upheld on appeal,” she adds.