Judge to employers: Tactical litigation to 'discourage employees from pursuing their rights' won't fly
A recent Ontario Superior Court (OSC) decision saw a judge put down an employer’s “unforgiving, scorched earth, and bare-knuckle” attempt to financially bully a former employee into dropping his wrongful dismissal claim.
The case in question, Giacomodonato v. PearTree Securities Inc., which resulted in the judge ordering the defendant to pay the employee the amount of the cost of the proceedings, sends a clear message to employers who engage in such tactics, according to Barry Kuretzky, partner at Littler in Toronto.
“It's important to understand that there are very few decisions where a judge so boldly indicates that the actions of the employer were clearly designed to be tactical and have no merit,” Kuretzky told HRD. “The judge was very convinced without issue that there was no merit to the tactical counterclaim.”
Non-compete counterclaim not based on merit
The plaintiff, David Donato, was hired by PearTree Securities in 2016 as its president and co-head of banking. In 2018, he was dismissed without cause, which kicked off the years of litigation leading to this superior court’s decision.
When Donato was fired, he sued PearTree for wrongful dismissal, claiming he was owed between $3.194 million and $3.927 million. At that time PearTree agreed that it owed Donato from $240,000 to $627,516, but it then counter-sued, accusing Donato of breaching a non-compete covenants in his employment agreement by going to work for a competitor nine months after his dismissal.
They claimed in that countersuit, based on an “expert report” according to the court filing, that Donato owed them $1 million in punitive damages, as they had suffered $1,599,000 million in general damages due to the breach. It was this claim that offended the judge, Kuretzky said.
“In the course of this litigation, the employee had a valid claim acknowledged by the employer for a certain amount of damages that he was owed. In order to dissuade that employee from seeking his rightful claim, the employer presented a meritless counterclaim, the judge concluded it was for the sole purpose of trying to get the employee to give up his claim, or to reduce his claim,” he said. “This clearly offended the judge.”
Costly litigation as tactics will not be tolerated
Three days before the end of the case, PearTree retracted its damages claims and instead asked that Donato repay all of the employment income he’d earned for the two years since they fired him without cause.
The judge dismissed PearTree’s counterclaim in its entirety, instead ordering the company to pay Donato $718,103.05 to cover his legal costs plus another $10,000 in punitive damages,.
The judge also called the non-compete and non-solicitation clauses PearTree claimed to have been breached “contrary to public policy and overly broad.” He confirmed that there was no evidence that Donato had competed unfairly or misused confidential information.
“Many companies are not happy to find that they're the subject of litigation from a past employee, and sometimes they think, ‘Let me find a manner in which I can hit back,’” Kuretzky said. “But the court has made it clear, at least this judge has made it very clear, that that's something that is purely going to result in a penalty in terms of costs, and it did.”
