When Will Punitive Damages Be Available in a Wrongful Dismissal Case?

Written by litigator and mediator Irvin Schein originally published at irvinschein.com.​

The recent case of Gordon v. Altus Group Limited provides an interesting insight into one circumstance, at least, in which punitive damages will be awarded against a former employer which has acted egregiously.

Alan Gordon had a company which sold its assets to Altus in November 2008.  A portion of the purchase price was connected to the performance of the business after the closing, with the price to be adjusted if appropriate by February 2010.  Gordon was hired to continue working in the business, as an Altus employee.

Gordon’s employment contract with Altus provided for payout provisions if the contract was terminated other than for cause, as well as a non-competition clause.

As February 2010 approached, issues arose between Gordon and Altus.  Altus complained that Gordon was difficult to work with, that he was involved in a conflict of interest, and that he failed to inform Altus that one of the employees of the business taken on by Altus had been charged with fraud.  At the end of March 2010, Altus fired Gordon, alleging cause and providing no notice.  Altus did insist, however, that Gordon honour his non-competition obligation in his contract.

Although it is not clear from the judgment, it also appears that before he was dismissed, the dispute between Gordon and Altus relating to a possible adjustment in the purchase price for the business had escalated to the point that Gordon commenced an arbitration proceeding under the sale agreement to determine the issue.

The matter went to trial in the summer of 2015.  The trial judge had no hesitation in finding that the allegations of cause were simply examples of “Altus puffing up complaints to justify its peremptory dismissal of Mr. Gordon”.  The court concluded that if Altus did have complaints concerning Mr. Gordon’s behavior, it should have imposed progressive discipline.

The court went on to find that the real basis for the termination had to do with the arbitration that Gordon had commenced to determine the appropriate adjustment to the purchase price for the business, if any.  The court characterized this conduct as “outrageous because Altus got mean and cheap in trying to get rid of an employee as they approached arbitration…”.

The court observed that according to the Supreme Court of Canada, “punitive damages may be considered if there is an independent actionable wrong” on the part of Altus.  An actionable wrong can be established with a breach of a distinct and separate contractual provision or other duty such as a fiduciary duty.  In this case, the court found that Gordon’s termination as a result of his having given notice to pursue arbitration under the purchase agreement constituted an independent actionable wrong.  The court awarded punitive damages at $100,000 “because that sum of money notes the harsh treatment to Allen Gordon over an extended period of time as a means of sanctioning Altus for its terrible conduct”.

Quite frankly, the decision is difficult to understand.  It is difficult to see how the invoking of the arbitration clause would be anything more than simply the motivation for the firing.  One might easily consider such conduct worthy of an award of punitive damages, but to call it an independent actionable wrong does seem to be a bit of a stretch.  Without doubt, the court was particularly upset with what it found to be retaliatory conduct on the part of the former employer.  That would appear to the be the only real issue setting this case apart from any other case in which an employer alleges cause and fails to prove it.  As such, the case may well stand for the position that wherever retaliatory conduct can be demonstrated, the door to a possible award of punitive damages opens up.