Courts should only resort to punitive damages in exceptional cases …. The independent actionable wrong requirement is but one of many factors that merit careful consideration by the courts in allocating punitive damages. Another important thing to be considered is 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…”
On Wallace or aggravated damages, the SCC stated:
We must therefore begin by asking what was contemplated by the parties at the time of the formation of the contract,… The contract of employment is, by its very terms, subject to cancellation on notice or subject to payment of damages in lieu of notice without regard to the ordinary psychological impact of that decision. At the time the contract was formed, there would not ordinarily be contemplation of psychological damage resulting from the dismissal since the dismissal is a clear legal possibility. The normal distress and hurt feelings resulting from dismissal are not compensable… Damages resulting from the manner of dismissal must then be available only if they result from the circumstances described in Wallace, namely where the employer engages in conduct during the course of dismissal that is “unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive”
On the possibility of recovering punitive damages and aggravated damages in the same wrongful dismissal case, the SCC stated:
It is important to emphasize here that the fundamental nature of damages for conduct in dismissal must be retained. This means that the award of damages for psychological injury in this context is still intended to be compensatory. The Court must avoid the pitfall of double compensation or double punishment that has been exemplified by this case.”
In the Wal-Mart case, a jury ordered Wal-Mart (and a supervisor) to pay significant damages to an employee who was treated badly by a supervisor and Wal-Mart. The resulting stress caused physical symptoms including abdominal pain, constipation and weight loss. She vomited blood and could not eat or sleep. Among other damages, Wal-Mart was ordered to pay $1,000,000 in punitive damages, $200,000 in Wallace (or aggravated) damages, constructive dismissal damages, and over $140,000 in legal fees. In addition, the OCA concluded Wal-Mart was vicariously liable for the $100,000 tort award against the supervisor. The OCA upheld the $200,000 Wallace damages, the $100,000 tort damages, the constructive dismissal damages, and the legal fees. Because Wal-Mart was liable for significant compensatory damages, its misconduct lasted less than six months, and it did not profit from its wrong the OCA reduced the punitive damage award from $1,000,000 to $100,000. At this point in time, we do not know whether Wal-Mart will appeal the Bouchard decision to the SCC. If so, the SCC will be asked to “clarify” the Honda decision in terms of when punitive damages and Wallace damages can be awarded in a wrongful dismissal case. In addition, if the SCC grants leave to appeal, we suspect Wal-Mart would ask the SCC to clarify when an employer can be found vicariously liable for the tort of the intentional infliction of mental suffering because of a supervisor’s actions. In the meantime, we anticipate that employee counsel will include claims for punitive damages, aggravated (or Wallace) damages, and damages for the intentional infliction of mental suffering in wrongful dismissal actions even if there is limited evidence to support these damage claims. As a result of the OCA’s decision in the Wal-Mart case, we expect wrongful dismissal settlements will be increasing in Ontario in the short-term.
Doug MacLeod, MacLeod Law Firm
