What Are Punitive Damages

Written by Galen T. Shimoda and Jennet F. Zapata

Compensatory damages are meant to compensate an employee for his or her loss because of the unlawful employment action, such as a termination or failure to hire. They are based on the specific amount of wages and benefits lost. Punitive damages, on the other hand, are meant to set an example and to punish the defendant for its actions. They can be substantial in certain cases and can even make the news. However, the employee must meet a high burden prior to recovering such damages.

In general, an employee must show by clear and convincing evidence that the defendant engaged in "oppression, fraud or malice," as defined under the law. An employer will only be liable for punitive damages based on the acts of its employee when: (1) the employer had advance knowledge of the unfitness of the employee and employed him or her with a conscious disregard of the rights or safety of others; (2) authorized or ratified the wrongful conduct for which the damages are awarded; or (3) was personally guilty of oppression, fraud, or malice. When the employer is a corporate employer, then only the actions of a high-ranking officer, director, or managing agent of the corporation can create exposure to liability for punitive damages. The officer, director, or managing agent must be an individual with advance knowledge, authorizing or ratifying the acts. So, in situations where the wrongful acts were known to or done by lower-level supervisors, a party will not be able to attribute those acts to the corporation so as to recover punitive damages.

Even in cases where an high-ranking officer, director, or managing agent of the corporation was involved, a party must still show that such high level representatives: 1) knew of the unfitness of its employee and continued to employ him/her despite the risk it posed to the rights or safety or others; 2) approved or consented to the wrongful acts of such employee; or 3) engaged in the wrongful acts himself or herself. Again, if a higher-ranking officer is not involved in the discriminatory acts, punitive damages will not likely be imposed.

For instance, courts have found corporations liable for punitive damages where the employer had knowledge that one of its employees was likely to sexually harass others, yet failed to take reasonable steps to prevent such conduct. The same determination has been made where the employer was aware of a supervisor's harassment of an employee and continued to employ such supervisor without taking any corrective measures. Thus, once a company has some knowledge that an employee has engaged in harassing conduct and fails to take all reasonable steps to prevent such harassing conduct, the company can be liable for punitive damages.

If you have any questions about whether you may have a claim for punitive damages, please consult with an attorney at the Shimoda Law Corp.

The Shimoda Law Corp. legal articles should not be construed as legal advice or a legal opinion on any specific facts or circumstances. The contents of these articles are intended for general information purposes only, and you are urged to consult a lawyer concerning your own situation and any specific legal questions you may have.

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