In litigation generally, punitive damages are rarely ordered.  Distinguished from damages of the normal compensatory sort, punitive damages are essentially meant to punish a wayward defendant who, in harming the plaintiff, exhibited conduct that was a marked departure from ordinary standards of decent behaviour.  Courts have awarded punitive damages where 1) the defendant’s conduct was reprehensible or malicious, 2) damages in excess of the compensatory damages are required for the purposes of retribution, deterrence, and denunciation, and 3) there is an actionable wrong independent of the underlying claim for damages (such as a breach of good faith).

In the employment world, terminated employees usually get dismissed “without cause” and are entitled to notice or payment instead.  In some cases, employees are dismissed “with just cause”.  An employer has just cause to terminate an employee where the latter exhibits conduct so serious that there is a complete breakdown in the employer-employee relationship.  Examples include acts of dishonesty or other conduct that is materially detrimental to the business.

In a recent case, punitive damages ($50,000) were ordered against an employer who terminated a senior employee citing just cause with no legitimate foundation.  The employee, a top performer, was essentially let go because his new supervisor wanted someone else in the employee’s place.  The employer claimed just cause ostensibly for tactical reasons.  The Court found that, basically, the employer wanted to pay the employee nothing in lieu of notice, or at least claim just cause as a bargaining chip in order to pay a lessor amount.  The Court was especially inclined to order punitive damages in light of the fact that the employer illegitimately claimed just cause knowing that the employee was facing significant financial challenges.

The key takeaway is that an employer should not claim just cause without a basis for it, as doing so would likely not produce tactical advantage but instead more damages against it.

Invitation for Discussion:

Our litigation lawyers are skilled at employment law matters. If you would like to discuss this blog in greater detail, or any other business litigation matter, please do not hesitate to contact one of the lawyers in the Business Litigation group at Linmac LLP.

Disclaimer:

Note that the foregoing is for general discussion purposes only and should not be construed as legal advice to any one person or company. If the issues discussed herein affect you or your company, you are encouraged to seek proper legal advice.