Supreme Court Ruling Favorable for Employers Regarding Future Lost Income and Punitive Damages

Cate Huff contributes to the “Virginia Hospitality Law” blog. You can read this article and others at VaHospitalityLaw.com.

On June 4, 2015, the Virginia Supreme Court held a circuit court erred in excluding evidence of an employee’s work history and quality of past job performance in determining future lost income. The Supreme Court also reversed the circuit court’s denial of a corporate employer’s motion to strike the employee’s punitive damages claim.

A former diesel mechanic filed suit against his supervisor and company for malicious prosecution and defamation. Following a jury trial, the jury awarded the employee significant compensatory and punitive damages against both the supervisor and the company.

Filing separate appeals, the supervisor and company both argued that the circuit court committed error when it excluded evidence of the employee’s work history and the quality of his past job performance. The Court reversed and held that such evidence is probative of the employee’s claimed damages, as the employee sought damages for future lost income and loss of earning capacity. In so ruling, the Court disagreed with the employee’s arguments that the evidence was more prejudicial than probative and was duplicative of other evidence introduced at trial.

The company also appealed the court’s denial of its motion to strike the employee’s punitive damages claims. The employee argued a company can only act through its agent, so any employee’s action is the company’s action for purposes of punitives. The Court reversed the circuit court, finding the employee failed to present sufficient evidence to support a punitive damages claim against the company. In reversing, the Court distinguished punitive damages from compensatory damages, where a company can be held liable for its employees’ actions under a theory of respondeat superior. Punitive damages can be awarded against a corporate employer under only two scenarios: (1) the employer participated in the wrongful act giving rise to the punitive damages claim, or (2) the employer authorized or ratified the acts giving rise to the claim. The employee failed to provide sufficient evidence to support punitive damages under either scenario. Unfortunately for the supervisor, he failed to appeal the award of punitive damages against him, so the court had no jurisdiction to consider its validity.

While the Court did not disturb the jury’s liability finding or its award of compensatory damages, these cases are a win for employers, as an employee cannot prove a claim for punitive damages against a company by merely showing that a supervisor acted wrongfully.

Read the full Opinion here.