Punitive Damages in Employment Law

An employer is obligated to act fairly and in good faith towards their employees. If an employer treats an employee maliciously, or intentionally breaks the law, Courts can punish that employer by awarding the employee what is called “punitive damages”.

In this article we will set out some of the circumstances under which punitive damages are awarded, the kinds of behaviour that warrant punitive damages, and how the courts determine whether punitive damages are appropriate.

What are Punitive Damages?

The Supreme Court of Canada defines the characteristics of punitive damage as follows:

Punitive damages may be awarded in situations where the [employer’s] misconduct is so malicious, oppressive and high-handed that it offends the court’s sense of decency… It is the means by which the judge expresses outrage at the egregious conduct of the [employer].

When are Punitive Damages Awarded?

Punitive damages are rarely awarded and when they are, it is only after careful and cautious consideration by the Court. Factors that the Court considers are meant to test how serious and egregious the employer’s conduct was.

For example:

  • Was the employer’s misconduct planned and deliberate?
  • Did it occur over a long period of time?
  • Did the employer try to hide, lie about, or cover up the misconduct?
  • Was there some ulterior inappropriate motive behind the misconduct, such as intimidation, an intent to harm the employee, or to otherwise extract some unfair unjust advantage?

What kinds of bad behaviour warrant punitive damages?

While there is no strict all inclusive list of misconduct that leads to awards of punitive damages, Courts have awarded punitive damages in a number of cases, including, where:

  1. an Employer terminates for just cause based on knowingly false or unsupportable allegations;
  2. an Employee is treated in a demeaning and/or humiliating manner;
  3. an Employer demands that an employee resign before it will provide a reference letter;
  4. an Employer threatens, extorts or intimidates an employee;
  5. an Employer intentionally lies to or misleads an employee; or
  6. an Employer intentionally violates the Employment Standards Act, 2000: see Altman v. Steve’s Music, 2011 ONSC 1480 (CanLII).

The Legal Test for Punitive Damages in the Employment Law Context

The Ontario Court of Appeal in Boucher v. Wal-Mart Canada Corp., 2014 ONCA 419 (CanLII), summarizes the legal test that the Ontario Court follows in deciding to award punitive damages, as follows:

  1. The defendant’s conduct is reprehensible.
  2. The defendant committed an “actionable wrong” independent of the underlying claim for damages for breach of contract; and
  3. A punitive damages award, when added to any compensatory award, is rationally required to punish the defendant and meets the objectives of retribution, deterrence and denunciation.

There have been a number of court cases that have ruled on each of the above three factors. Let’s take a deeper review of some of the defining principles of law that have emerged.

1. Reprehensible Conduct

Reprehensible conduct has been explained in a couple of cases, as follows:

  • In Vorvis v. Insurance Corp. of British Columbia, [1989] 1 SCR 1085, the Supreme Court of Canada observed that conduct meriting punitive damages awards must be:

“harsh, vindictive, reprehensible and malicious”, as well as “extreme in its nature and such that by any reasonable standard it is deserving of full condemnation and punishment”.

… the impugned conduct must depart markedly from ordinary standards of decency—the exceptional case that can be described as malicious, oppressive or high-handed and that offends the court’s sense of decency

The test … limits [a punitive damages] award to misconduct that represents a marked departure from ordinary standards of decent behaviour. Because their objective is to punish the defendant rather than compensate a plaintiff (whose just compensation will already have been assessed), punitive damages straddle the frontier between civil law (compensation) and criminal law (punishment).

[P]unitive damages should be resorted to only in exceptional cases and with restraint.

2. Committed an Actionable Wrong

The law does not permit individuals to be punished simply because they do something that a Judge or the Court doesn’t like or approve of. The legal system isn’t there to punish unethical behaviour, only illegal behaviour. Therefore, punitive damages can only be awarded where the misconduct of the employer amounts to some wrong that could give rise to a lawsuit by itself.

In Royal Bank of Canada v. W. Got & Associates Electric Ltd. [1999] 3 SCR 408,  this Court confirmed that “the circumstances that would justify punitive damages for breach of contract in the absence of actions also constituting a tort are rare”. Rare they may be, but the clear message is that such cases do exist.  The Court has thus confirmed that punitive damages can be awarded in the absence of an accompanying tort.

Therefore, the requirement of an independent actionable wrong can be met by either an independent tort, a breach of fiduciary duty or a breach of a contractual duty such as the duty of good faith or fair dealing.

3. Rationally Required to Punish the Employer and Meets the Objectives of Retribution, Deterrence and Denunciation.

Ordinarily, a Court simply puts an employee back into the position they would have been in but for the conduct of the employer. This is called “compensatory” damages. Punitive damages are different. They are ordered on top of compensatory damages resulting in the employee getting more than he would normally be entitled to and is therefore actually in a better position as a result. Punitive damages are essentially legal recompense that a defendant found guilty of committing a wrong or offense is ordered to pay on top of compensatory damages. They are meant as punishment for behaviour that is considered abhorrent.

This principle is explained in Fidler v. Sun Life Assurance Co. of Canada, [2006] SCR 3, “[W]hile compensatory damages are awarded primarily for the purpose of compensating a plaintiff for pecuniary and non-pecuniary losses suffered as a result of a defendant’s conduct, punitive damages are designed to address the purposes of retribution, deterrence and denunciation.”

For this reason, the Courts have to consider whether an employer has been properly punished and whether a punitive damage would help achieve this objective.

Punitive Damages Are Not Available In Human Rights Tribunal Decisions

The Human Rights Tribunal does not have jurisdiction to award punitive damages.

Contact Justin W. Anisman

Contact Justin W. Anisman, the author of this blog, about any employment law related questions or issues you may be facing. Call 416-304-7005 or email him at janisman@btlegal.ca.

Justin W. Anisman is an Employment Lawyer at the Toronto law firm Brauti Thorning LLP. Justin advises both companies and individuals in all aspects of employment law including wrongful dismissal, human rights and discrimination.

The publications made on this website are provided and intended for general introductory information purposes only. They do not constitute legal or other professional advice, or an opinion of any kind. Speak to a professional before making decisions about your own particular circumstances.

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