The Ontario Court of Appeal has substantially reduced  a record setting $1 million in punitive damages jury award against a retail employer and $150,000 in punitive damages against a former manager.  These damages were reduced to $10,000 against the manager and $100,000 against the company.

The employee in this case worked for a major retailer in various positions since 1999. In 2008 she was hired as assistant manager. Her collegial working relationship with her manager turned sour in less than a year. In May 2009 the manager was found to have asked the employee to falsify temperature records for the store’s food and dairy refrigerators. When the employee refused, the manager gave her a disciplinary ‘coaching’ session. The employee reported this incident to the District People Manager of the company. In breach of its policy, the manager was informed of this meeting and berated the employee for reporting him.  The manager then used profane language and belittled the employee in front of other employees.  The manager told the employee she was terrible at her job in front of customers. When the employee raised these issues with senior management she was told that they would investigate her concerns, but if they were false she would be held accountable. The investigation team found Ms. Boucher’s claim to be unsubstantiated. The last straw occurred on November 18, 2009 when the Manager yelled at the employee for failing to unload some products then grabbed her by the elbow in front of her co-workers and told her to prove to him that she could count to ten.

This pattern of conduct was found to warrant a punitive damages award of $1 million against the company and $150,000 against the manager (in his individual capacity). The decision was appealed to the Ontario Court of Appeal.

The Ontario Court of Appeal lowered the quantum of punitive damages against both the manager and the company, for two primary reasons. First, punitive damages are based on deterrence and denunciation for egregious behaviour rather than compensation to the plaintiff. In order to ascertain the correct amount of punitive damages the court must also look at the amount of compensatory damages. The total of these two figures must, in the Court’s view, be rationally required to punish and deter the defendant. The awards of the lower court did not meet this objective.

Secondly, punitive damages should not be attributed to an employer vicariously through a managerial employee’s misconduct. Rather, such damages must be awarded based on the employer’s conduct. The substantial amount of both compensatory and aggravated damages awarded to the employee permitted the court to lower the jury-determined amount of punitive damages for the manager’s conduct. The punitive damages against the company were lowered for the same reason and also because they could only be attributed specifically to the company’s failure to thoroughly investigate the employee’s claims and discipline the manager.

This case highlights the importance of investigating allegations of harassment and the risks of a substantial damages award where this is not done adequately.  While damages awards are significant, the Ontario Court of Appeal has reined in the stratospheric damages award of the lower court. While lessened, such damages are still substantial and their punitive nature means the award is intended as a warning to deter other employers in Ontario and across Canada from similar conduct.