Jun 21

Former President Awarded 10K in Punitive Damages for Wrongful Dismissal

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In the case of Giacomodonato v PearTree Securities Inc., 2023 ONSC 3197, the former President of PearTree filed a claim for wrongful dismissal and was awarded $10,000 in punitive damages by the Ontario Superior Court of Justice.

Background 

The plaintiff, an experienced investment banker specializing in the mining sector, joined PearTree Securities in 2016 as President and co-head of banking. In January 2018, he was terminated from his position without cause and subsequently filed a claim against PearTree, seeking compensation for wrongful dismissal and amounts he believed the company owed him. The plaintiff argued that he had been underpaid by PearTree, with the amount ranging from $3.2 million to $3.9 million, depending on the calculation methodology and specific details of his employment.

PearTree, however, countered by asserting that the plaintiff was owed a much lower sum, ranging from $240,000 to $627,000, depending on various factors and the methodology employed. Additionally, PearTree filed a counterclaim, alleging that the plaintiff had breached the restrictive covenants in his employment contract by joining a competitor company nine months after his termination from PearTree.

Enforceability of Employment Contracts

The plaintiff signed his initial employment contract with PearTree on April 11, 2016. Due to the financial implications of leaving his previous job, PearTree provided an additional $40,000 as assistance. Subsequently, in July 2016, PearTree presented a second employment contract with additional provisions.

The plaintiff argued that the second employment contract lacked enforceability as it did not provide him with fresh consideration and introduced significant changes to the terms and conditions outlined in the first contract. PearTree, on the other hand, contended that fresh consideration was indeed provided through the additional $40,000 and additional paid vacation.

The court upheld PearTree’s position, deeming the second employment contract enforceable because the plaintiff willingly accepted it after negotiations, with the benefit of legal advice. The court also recognized that fresh consideration had been provided in this instance.

Compensation

Regarding the plaintiff’s claim of being underpaid by PearTree, the court ruled that he should be compensated for the first year of his employment at the company, according to the terms outlined in the second employment contract starting from July 11, 2016. This compensation would be based on transactions where the issuer signed a term sheet with PearTree after that date, resulting in income for PearTree.

Punitive Damages

The court emphasized that punitive damages can only be awarded to punish misconduct that significantly deviates from reasonable standards of behavior, demonstrating characteristics of harshness, vindictiveness, reprehensibility, or maliciousness. The court dismissed the plaintiff’s claims that PearTree breached its duties of honest performance, good faith, and fair dealing, as well as the plaintiff’s allegation of being misled about the terms of his employment. Furthermore, the court rejected the argument that PearTree’s counterclaim justified an award of punitive damages.

However, the court did find that PearTree’s failure to pay the amounts owed to the plaintiff after his termination warranted an award of punitive damages. PearTree was aware of the significant amount still owed to the plaintiff under the terms of the second employment contract, yet they demanded that he sign a certificate of compliance regarding the restrictive covenants in his contract. When the plaintiff refused to sign, PearTree discontinued his salary continuation payments, offset amounts owed against previous payments, and issued a cheque with a unilateral condition stating that cashing the cheque would result in the plaintiff relinquishing any further monetary claims.

The court ruled that PearTree had no lawful authority to take these actions and had abused its power, leading to the award of $10,000 in punitive damages.

PearTree’s Counterclaim

PearTree brought a counterclaim, alleging breaches of the non-competition, non-solicitation, and confidentiality clauses in the employment contract, as well as breach of fiduciary duty and unjust enrichment. However, the court dismissed the counterclaim in its entirety. The non-competition and non-solicitation clauses were deemed unenforceable as PearTree lacked a legitimate proprietary interest to protect. Additionally, the court found that the plaintiff had not breached any fiduciary duties. Considering the unenforceability of the non-competition and non-solicitation clauses, the court stated that a departing fiduciary is entitled to use their skills and experience to compete with the corporation.

Furthermore, the court determined that even if the plaintiff had breached any of these duties, PearTree failed to demonstrate any resulting losses following his termination. In the event of a breach, the court would have awarded PearTree a mere $1.00 in damages.

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