Employers be warned: punitive damages continue to climb

Employers be warned: punitive damages continue to climb

Employers be warned: punitive damages continue to climb

“This is at the high end of punitive damages,” says Portman. “While we have seen higher damages awards in cases where there is a significant and ongoing act of bad faith by the employer, such as where the employer has instigated a malicious criminal prosecution, this is near the high end of the range for bad faith terminations.”

According to Portman, there are a number of concerns employers should have with this recent decision.

“First, the size of the award is very high, and is quite close to the amount of notice awarded,” he says. “In a case like this, where the parties implemented a termination clause which was later upheld by the court, an award such as this significantly increases the liability that an employer can face.

The second, and perhaps more pressing concern, highlights the dangers of ambiguity.
“There is very little judicial explanation upon which the court's finding of the necessary separate actionable wrong rests,” he says.

“In effect, the court suggested that the employee was dismissed because of his claims for additional compensation under the sale of business.

“However, while such a reason may not constitute just cause in law, it does not appear to create an independent actionable wrong, nor justify an additional award of damages.

“As a result, there is a very real danger that this decision could be used by creative employee side counsel to suggest that the courts should be more receptive to employee claims for punitive damages, even in cases where the existence of a separate actionable wrong is less than clear.”

Employer warning

“Employers need to be aware of the increasing awareness of courts of punitive and aggravated damages in employment law claims,” warns Portman.

“These awards go above and beyond common law notice, and are not assessed on the same factors that govern common law notice awards,” he continues.

“While employers do not need any reminders to follow good practices of good faith and communication in the dismissal process, employers should ensure that they have documented the important parts of the decision to terminate and the dismissal itself, regardless of if they intend to rely on just cause for the dismissal. Such records can be invaluable in defending against employee claims for punitive and aggravated damages.”

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