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Judge overrules jury on award of punitive damages
An Ontario court has recently upheld the termination of an
employee and limited the employee’s notice entitlements to those provided in
his contract of employment. As well, the judge overturned an award of $60,000
in punitive damages made by a jury.
The case, Ilie v. S210 Technologies
Corp. (November 12, 2003), concerned Adrian Ilie, an electrical engineer
who was laid off after ten months of employment. Ilie was given two weeks’
salary in lieu of notice in accordance with the following provision:
"S210 is free to
terminate your employment at any time by providing you with (i) 2 weeks prior
written notice (or such greater minimum notice as may be required under the Employment
Standards Act (Ontario), or with equivalent pay in lieu of notice
calculated in accordance with the requirements of the Employment Standards
Act (Ontario); plus (ii) such other amounts or entitlements which are
required to be provided to you in accordance with, and are limited to, the minimum
requirements of the Employment Standards Act (Ontario)."
PROVISION ENFORCEABLE
Ilie argued that the provision was unenforceable because it
was ambiguous and that, therefore, he was entitled to common law reasonable
notice damages. The judge held that, although the provision lacked clarity, it
did not offend the Employment Standards Act but, rather, relied on the
statute to set the minimum notice entitlement.
The judge also rejected Ilie’s argument that the employment
contract was unconscionable and, therefore, void. He noted that the high tech
industry was volatile and that the employer was highly dependent on venture
capital funding. In view of the funding problems faced by the employer, it was
reasonable that it would seek to limit its liability to terminated employees.
Accordingly, the judge held that there was no power imbalance between employee
and employer that would render the employment contract unenforceable.
NO WALLACE OR PUNITIVE DAMAGES
Ilie’s case was split into two parts, with the judge ruling
on the contractual and reasonable notice issues, and a jury determining the
claim for punitive damages. Despite his decision in favour of enforcing the
contract, the judge went on to consider what Ilie’s damages would have been if
the contract had been unenforceable. He ruled that, apart from any Wallace
(see "Fairly,
reasonably and decently": Employers obliged to deal in good faith with
dismissed employees, Supreme Court rules" on our Publications page)
or punitive damages, Ilie’s common
law notice period would have been ten weeks.
Ilie’s claim for Wallace and punitive damages related
to the manner in which he had been terminated. The termination had occurred
immediately after Ilie had undergone minor surgery for removal of varicose
veins. However, Ilie and the employer provided differing accounts of the
termination. Ilie stated that he had received an angry and curt call from the
employer on the day after his surgery, advising him that he must meet with the
employer early the next morning. The employer denied that it had required Ilie
to report to the office and stated that the purpose of the call had been to
ensure that Ilie call in before reporting to work, so that a meeting could be
arranged with him off-site. The judge accepted the employer’s evidence,
stating:
"In my view [the employer] did
everything possible to carry out the termination without creating any problems
or embarrassment for [Ilie]. As has been said many times, there is no easy way
to terminate an employee. …The call to the home the day after the surgery may
have been an unfortunate incident but, in my view, it doesn’t justify the
extension of the notice period as required in Wallace. … In this case
there was no termination for cause. No false allegations were made. They
attempted to terminate him off site. It may not have been the most appropriate
time for termination, however, there was no malice or blatant disregard for the
employee."
Before the judge issued his ruling on Wallace
damages, the jury, based on the same evidence, had awarded Ilie $60,000 in
punitive damages – $40,000 more than Ilie himself had asked for. Employer’s
counsel had argued that, even if all the facts alleged by Ilie were accepted by
the jury as true, there could be no basis for an award of punitive damages. In
his written decision, the judge agreed, noting that punitive damages in cases
of breach of contract require proof of an "independent actionable wrong", which
had not been shown in this case.
In contrast, the judge pointed to the 2002 decision of the
Supreme Court of Canada in Whiten v. Pilot Insurance Company, in which
the Court had held that punitive damages were available in exceptional cases of
breach of contract. Whiten had involved particularly bad faith and
egregious conduct by an insurer against a family whose home had been destroyed
by fire. After providing the family with rent for a small winterized cottage
for six months, the insurer had cut them off, alleging that the house had been
torched, against the opinion of the local fire chief and its own expert
investigator. The plaintiff in Whiten had had to spend $320,000 pursuing
a $345,000 claim. In that case, the jury’s award of $1,000,000 in punitive
damages was held to be justifiable.
In concluding that the jury’s award in the Ilie case
was made in error, Chadwick J. concluded:
"Notwithstanding the jury in this
case was given the facts in Whiten and also told in detail that punitive
damages are the exception to the rule and provided with the language from Whiten
as to what must be found before punitive damages can be awarded, the jury
allowed an award of punitive damages. Even if the jury accepts all of the facts
as put forth by [Ilie], which they must have in order to come to this
conclusion, in my view there are no facts on which a properly charged jury
could justify a finding of punitive damages."
In Our View
It should be noted that, in addition to requiring an
independent actionable wrong as a precondition for an award of punitive damages
in a case of breach of contract, courts have stated that the conduct at issue
must be harsh, vindictive, reprehensible and malicious. (For wrongful dismissal
actions in which punitive damages have been awarded, see, for example, "Long-serving employee on serial short-term contracts wins
record notice and punitive damages" on our Publications page.)
For further information, please
contact Jock Climie, who argued the Ilie case, at (613)
940-2742.
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