Author: Stacey Staios - Articling Student
Edited By: Ryan Carson
In many wrongful dismissal cases, employees may be entitled to what is known as aggravated and punitive damages. Aggravated damages are compensatory in nature and often require the employer to have engaged in bad faith during the employee’s dismissal, and where the employer’s bad faith results in actual harm to the former employee.
Punitive damages, on the other hand, are not compensatory. Although a claim for punitive damages does not necessarily deal with the manner of termination, it does include the immediate post-termination conduct by the employer and recognizes any attempts made to intimidate the employee into withdrawing their claim. A court may award an employee punitive damages when it is necessary to punish, or denounce the employer’s conduct during a dismissal. The purpose of punitive damages is to condemn employer misconduct that is objectively considered to be ‘malicious, oppressive and high-handed’.1 A court may also award punitive damages when they wish to send a message to other employers indicating that behaviour of such kind is unacceptable and will not be tolerated.
To further understand both aggravated and punitive damages, it is important to exam the relevant case law. In the case Morison v Ergo-Industrial Seating Systems Inc. the Ontario Superior Court of Justice awarded Morison $50,000.00 in punitive damages against their employer.2 Morison was hired in 2004 as an alleged independent contractor and became an employee in 2006. In 2012, Morison was fired from his position as manager with no prior warning, with his employer claiming just cause. The court first determined that Morison was an employee from the time he began employment in 2004. The court also agreed with Morison who argued for an increase in reasonable notice of twelve months.
In this case, aggravated damages could not be proven by the employee. Although the court was unimpressed with the employer’s conduct during the dismissal, they did not award aggravated damages because Morison was unable to prove that he had suffered actual harm as a result of his termination of employment.3 However, the court accepted that the employer’s conduct warranted an order of punitive damages of $50,000.00 in order to punish the defendant and to meet the objectives of retribution, deterrence and denunciation.4
Another case that illustrates the courts discretion for awarding damages is Ruston v Keddco. In 2004, Ruston was hired by the employer, Keddco, and advanced quickly, being promoted to president of the company. In 2015, Keddco informed Ruston that he was being dismissed for cause and alleged that Ruston committed fraud during his employment, although no details were provided.5
Ruston then commenced a claim against Keddco, seeking damages for wrongful dismissal. In response, Keddco commenced a counterclaim alleging cause and claiming damages of $1.7 million for the alleged fraud, in addition to $50,000.00 in punitive damages. During the trial, Keddco failed to prove any of the allegations against Ruston, and was found responsible for using the counterclaim as an intimidation tactic, ultimately breaching their obligation of good faith and fair dealings during a dismissal.6
The court awarded Ruston damages in lieu of noticed equaling 19 months, and punitive damages in the amount of $100,000.00, along with aggravated damages in the amount of $25,00.00. Ruston was awarded $546,684.73 in substantial indemnity costs.7 The court of appeal declined to interfere with the amount awarded to Ruston, despite identifying how unusually high the costs were.
Given the cases mentioned, there are a few takeaways that both employers and employees should note. The decision in both cases illustrate the importance of an employer’s duty of good faith and fair dealings during a dismissal. Further, if alleging just cause for termination, employers should ensure a reasonable basis and provide evidence to support any allegations made. Employers should also refrain from commencing a counterclaim to intimidate or dissuade the employee form seeking legal action against them, as it often results in significant damages against the employer.
To further understand both aggravated and punitive damages, it is important to exam the relevant case law. In the case Morison v Ergo-Industrial Seating Systems Inc. the Ontario Superior Court of Justice awarded Morison $50,000.00 in punitive damages against their employer.2 Morison was hired in 2004 as an alleged independent contractor and became an employee in 2006. In 2012, Morison was fired from his position as manager with no prior warning, with his employer claiming just cause. The court first determined that Morison was an employee from the time he began employment in 2004. The court also agreed with Morison who argued for an increase in reasonable notice of twelve months.
In this case, aggravated damages could not be proven by the employee. Although the court was unimpressed with the employer’s conduct during the dismissal, they did not award aggravated damages because Morison was unable to prove that he had suffered actual harm as a result of his termination of employment.3 However, the court accepted that the employer’s conduct warranted an order of punitive damages of $50,000.00 in order to punish the defendant and to meet the objectives of retribution, deterrence and denunciation.4
Another case that illustrates the courts discretion for awarding damages is Ruston v Keddco. In 2004, Ruston was hired by the employer, Keddco, and advanced quickly, being promoted to president of the company. In 2015, Keddco informed Ruston that he was being dismissed for cause and alleged that Ruston committed fraud during his employment, although no details were provided.5
Ruston then commenced a claim against Keddco, seeking damages for wrongful dismissal. In response, Keddco commenced a counterclaim alleging cause and claiming damages of $1.7 million for the alleged fraud, in addition to $50,000.00 in punitive damages. During the trial, Keddco failed to prove any of the allegations against Ruston, and was found responsible for using the counterclaim as an intimidation tactic, ultimately breaching their obligation of good faith and fair dealings during a dismissal.6
The court awarded Ruston damages in lieu of noticed equaling 19 months, and punitive damages in the amount of $100,000.00, along with aggravated damages in the amount of $25,00.00. Ruston was awarded $546,684.73 in substantial indemnity costs.7 The court of appeal declined to interfere with the amount awarded to Ruston, despite identifying how unusually high the costs were.
Given the cases mentioned, there are a few takeaways that both employers and employees should note. The decision in both cases illustrate the importance of an employer’s duty of good faith and fair dealings during a dismissal. Further, if alleging just cause for termination, employers should ensure a reasonable basis and provide evidence to support any allegations made. Employers should also refrain from commencing a counterclaim to intimidate or dissuade the employee form seeking legal action against them, as it often results in significant damages against the employer.
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References
1 Boucher v Wal-Mart Corp2 Morison v Ergo-Industrial Seating Systems Inc., 2016 ONSC 6725
3 Ibid.
4 Ibid.
5 Ruston v Keddco MFG. (2011) Ltd., 2019 ONCA 125
6 Ibid.
7 Ibid.