In Giacomodonato v. PearTree Securities Inc., 2023 ONSC 5628, Ontario’s Superior Court of Justice ordered the employer to pay to the employee the costs of the proceeding in the amount of $830,761 to dissuade employers from engaging in tactical litigation designed to discourage employees from pursuing their rights.  This case involved a wrongful dismissal claim by the employee seeking between $3.194 million and $3.927 million from the employer, and a counterclaim by the employer seeking general damages of $1,599,000 and $1,000,000 in punitive damages.    

Background

In 2016, the employee joined the employer as President and co-head of banking.  He was dismissed without cause in 2018, and sued the employer for wrongful dismissal and amounts he claimed the employer owed him: between $3.194 million and $3.927 million.  The employer admitted it owed the employee between $240,000 and $627,516.

The employer counterclaimed against the employee for breaching restrictive covenants in his employment agreement when he went to work for a competitor nine months after the employer terminated his employment. The employer claimed it suffered $1,599,000 million in general damages and sought $1 million in punitive damages.

The court found the employee had been undercompensated and awarded him $10,000 in punitive damages for the employer’s decision to suspend his salary continuation payments, offset money it owed to him against money it had paid to him, and its attempt to get him to waive a claim to further amounts owed to him by accepting money the employer admitted it owed him.

The court granted judgment to the employee for $718,103 and dismissed the employer’s counterclaim. It found the non-competition and non-solicitation clauses to be unenforceable and that there was no evidence the employee ever misused confidential information or competed unfairly. Finally, it found that if the employee was a fiduciary, there was no evidence that he breached duties that survived the termination of his employment.

As the parties could not resolve the costs of the proceeding, it was decided by the court.  

Decision

Among other reasons, the court ordered the employer to pay the costs of the proceeding in the amount of $830,761 on a partial indemnity basis to discourage “frivolous and strategic claims.” It found the employer’s counterclaim, including its claim for punitive damages, was “obviously meritless” and warned employers that owe money to employees they “should be discouraged from engaging in tactical litigation designed to discourage employees from pursuing their rights and entitlements.”

The court emphasized the following factors:

[The employer] invited this litigation. [The employer] conducted this litigation in an unforgiving, scorched earth, and bare-knuckle manner. It missed no opportunity to malign [the employee].  [The employer’s] decision to pursue a counterclaim and punitive damages of so little merit leaves me to infer that those claims were advanced only for tactical reasons and in an attempt to dissuade [the employee] from pursuing the money [the employer] owed to him. [The employer’s] attempt to now claim that this action “was an unexceptional employment action” is entirely inconsistent with its own approach to this litigation. In my view, and in light of the choices it made in the conduct of this litigation, it should have reasonably expected to face a costs order of this magnitude. [Emphasis added]