Huge Punitive Damage Awards Should Govern Employers’ Actions

July 9th, 2013 by

A trial judge in Pate Estate v. Galway-Cavendish and Harvey (Township) recently awarded an employee $550,000 in punitive damages. This should sound warning bells for employers contemplating any action that might be considered by the court to warrant such damages.

What type of conduct could warrant damages that high you ask? In Pate Estate, a supervisor for the Township of Galway-Cavendish and Harvey made known to an employee, John Pate that there were allegations against him with regard to missing building permit fees. Pate was told by the supervisor that if he resigned the police would not get involved. Pate, however, maintained his innocence.

A few weeks later the supervisor informed the OPP that he had information regarding four cases of alleged theft. The supervisor never mentioned, however, that one of these cases had already been investigated and no wrongdoing was found, and that during a move a number of files had been lost. Six months later the OPP laid criminal charges against Pate for the four cases of alleged theft. Pate was later acquitted on all charges.

Soon after, Pate began a wrongful dismissal action against the Township of Galway-Cavendish and Harvey. Among other things, Pate was seeking punitive damages. The trial judge, taking into account the actions of the township, initially awarded $25,000 because the judge believed he was “bound by the principles of proportionality”. The Ontario Court of Appeal, however, believed that the trial judge should have awarded higher punitive damages given the actions of the Township. A new trial was ordered in front of the same judge.

The trial judge then awarded, upon having a second look at the matter and taking note from another case, awarded $550,000. The case that the judge in Pate Estate used was the 2008 case, McNeil v. Brewers Retail Inc., where the Court of Appeal for Ontario upheld a jury’s award of $500,000 in punitive damages. The facts of McNeil were very similar to Pate Estate.

The important point to note in this decision is that the trial judge originally found that he was bound by the “principles of proportionality.” However, when the case came back before him after the Court of Appeal’s decision, the principles of proportionality changed greatly.

This, combined with the decision in McNeil, set an expensive standard for punitive damages in wrongful dismissal cases. The Court of Appeal for Ontario has made it evident that they are willing to severely punish employers if their actions demand it and expect lower courts to do the same.

This huge award is another cautionary tale for employers and should govern any future action when dealing with an employee. Otherwise, given the latest case law and depending on the action the employer takes, it could cost them big.

For further information on how punitive damage awards should govern employers’ actions or assistance in regards to wrongful dismissal actions in the workplace or other matters regarding employment law and damages, please contact one of our Toronto employment lawyers at Devry Smith Frank LLP.

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