Employers must be both cautious and fair when pressing for criminal charges against a dismissed employee. The Court of Appeal clarified in Pate v. Galway-Cavendish (Township) that it is easier for a dismissed employee to prove malicious prosecution by an employer than by a Crown attorney and in particularly egregious cases, trial judges will need to provide sound reasons as to why substantial punitive damages awards for wrongful dismissal should not be ordered against the employer.

Trial Judge: No Malicious Prosecution and Modest Punitive Damages

In Pate, the employer terminated a building inspector for discrepancies in remitting permit fees that had been paid to the inspector. The employer pressed for criminal charges to be laid against the inspector and withheld exculpatory evidence from the police.

After a four day criminal trial, the inspector was acquitted and exonerated. The employer’s actions with respect to the dismissal and withholding of exculpatory evidence came out at the criminal trial. The inspector then sued the employer for wrongful dismissal and malicious prosecution. The trial judge dismissed the claim for malicious prosecution. There was no dispute in the civil trial that there was no cause for termination. The trial judge awarded a reasonable notice period of 12 months plus: 

  • a four-month bump-up to the notice period for Wallace damages;
  • $75,000 for general and aggravated damages for intentional infliction of mental distress and social and economic damages;
  • $7,500 for special damages; and
  • $25,000 for punitive damages.  

Court of Appeal: Re-Think Those Findings

On appeal, the Court of Appeal overturned the decision on malicious prosecution and sent that issue back for trial because, among other reasons, the trial judge had set the standard for proving malicious prosecution against the employer too high and had failed to carry through the findings regarding the employer’s reprehensible and malicious conduct into the analysis of malicious prosecution.

The Court of Appeal also sent the issue of punitive damages back for a new trial. The trial judge had made a finding of significant misconduct by the employer that lasted over a lengthy period and had a devastating impact on the inspector’s life, and had awarded amounts under the other heads of damages. The trial judge failed to explain why he considered awarding more than $25,000 in punitive damages but declined to do so based on “principles of proportionality”. A new trial was ordered on that issue.

In light of Pate, employers must tread very carefully when pursuing criminal charges against former employees. Failing to act fairly and appropriately could result in, amongst other things, a malicious prosecution lawsuit and significant damage awards.