Many California wrongful termination complaints ask for punitive damages, but a company can’t be punished just because a supervisor acted badly. Under Civil Code section 3294(b), the employee has to tie the misconduct to an officer, director, or managing agent, and prove malice, oppression, or fraud by clear and convincing evidence. A supervisor’s power to hire and fire isn’t enough by itself. Who made the decision, and who approved it afterward, usually decides whether punitive exposure is real.
When can an employer be liable for punitive damages?
Only when the wrongdoing is tied to an officer, director, or managing agent who shapes company policy. Civil Code section 3294(a) allows punitive damages “where it is proven by clear and convincing evidence that the defendant has been guilty of oppression, fraud, or malice.” That’s a higher standard of proof than the preponderance standard for the underlying claim.
Subdivision (b) adds a second layer for employers. An employer isn’t liable for punitive damages “based upon acts of an employee of the employer, unless 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 or authorized or ratified the wrongful conduct for which the damages are awarded or was personally guilty of oppression, fraud, or malice,” according to section 3294(b). For a corporation, that knowledge, authorization, ratification, or misconduct “must be on the part of an officer, director, or managing agent of the corporation.”
The statute also defines its terms. “Malice” includes “despicable conduct which is carried on by the defendant with a willful and conscious disregard of the rights or safety of others,” under subdivision (c)(1). A termination decision that was wrong, or even unlawful, isn’t automatically despicable.
Who counts as a managing agent?
Fewer people than plaintiffs usually allege. In White v. Ultramar, Inc. (1999) 21 Cal.4th 563, the Supreme Court of California rejected the idea that any supervisor with power to hire and fire is a managing agent. The court explained the problem with that view: “If we equate mere supervisory status with managing agent status, we will create a rule where corporate employers are liable for punitive damages in most employment cases,” according to the opinion.
The test the court adopted asks about authority over company policy. A plaintiff “would have to show that the employee exercised substantial discretionary authority over significant aspects of a corporation’s business,” according to White. The court described managing agents as employees who “exercise substantial independent authority and judgment” in corporate decisionmaking, and it called the scope of that authority a question of fact decided case by case.
White didn’t come out well for the employer, though. The employee was fired by a zone manager who oversaw eight stores and at least 65 employees, and whose superiors had delegated most of the responsibility for running those stores to her. The court held that her “supervision of plaintiff and her ability to fire him alone were insufficient to make her a managing agent,” but that her broader authority over the stores did make her one, so the punitive award stood.
That’s the practical point for employers. Titles don’t decide the question. A regional or district manager with real control over a large part of the business can be a managing agent, while a department head who follows HR’s playbook may not be.
Can an employer ratify a manager’s conduct after the fact?
Yes, and ratification is often where plaintiffs focus. Section 3294(b) covers an employer that “authorized or ratified the wrongful conduct,” so a decision made by a mid-level supervisor can still support punitive damages if an officer or managing agent later approves it with knowledge of what happened.
This is where internal processes matter. A complaint about a supervisor that reaches a senior executive, and is closed without any real look, gives the employee a ratification argument. A documented investigation by someone independent, with corrective action where warranted, makes that argument much harder. The firm’s post on harassment investigations covers what a defensible investigation looks like.
What limits apply to the amount?
Constitutional ones, and they can cut an award sharply. In Roby v. McKesson Corp. (2009) 47 Cal.4th 686, a jury awarded $15 million in punitive damages against an employer in a disability discrimination case. The Supreme Court of California concluded “that a one-to-one ratio between compensatory and punitive damages is the federal constitutional limit here,” pointing to “the relatively low degree of reprehensibility on the part of employer McKesson and the substantial compensatory damages verdict,” according to the opinion.
Roby doesn’t set a universal one-to-one cap. The court based its conclusion on the facts of that case. But it’s a reminder that a large punitive verdict is often the starting point for post-trial motions and appeal, not the final number.
| Issue | Rule | What the defense looks for |
|---|---|---|
| Standard of proof | Clear and convincing evidence of oppression, fraud, or malice (§ 3294(a)) | Business reasons documented when the decision was made |
| Who acted | Officer, director, or managing agent (§ 3294(b)) | The decision-maker’s real authority over company policy |
| Supervisor status | Power to hire and fire isn’t enough by itself (White) | Evidence that policy was set above the decision-maker |
| Ratification | Approval with knowledge of the misconduct (§ 3294(b)) | An independent investigation of complaints |
| Financial evidence | Kept out until liability and malice are found (§ 3295(d)) | A timely application to bifurcate |
| Amount | Constitutional ratio limits (Roby) | Post-trial motions and appeal |
Can the employee get the company’s financial records?
Not automatically. Civil Code section 3295(c) says “No pretrial discovery by the plaintiff shall be permitted” into the defendant’s profits or financial condition without a court order. To get that order, the plaintiff must show “there is a substantial probability that the plaintiff will prevail on the claim pursuant to Section 3294.”
At trial, the employer can keep that evidence out until it’s needed. Under subdivision (d), the court “shall, on application of any defendant, preclude the admission of evidence of that defendant’s profits or financial condition until after the trier of fact returns a verdict for plaintiff awarding actual damages and finds that a defendant is guilty of malice, oppression, or fraud.” Making that application is routine, and skipping it lets the jury hear about the company’s revenue while it’s still deciding liability.
The complaint can’t name a number, either. Subdivision (e) states “No claim for exemplary damages shall state an amount or amounts.” A complaint that demands a specific punitive figure is open to a motion to strike that part.
When a complaint seeks punitive damages
- Preserve the decision file for the challenged action, including who proposed it, who approved it, the emails and texts among them, and any complaint the employee made and how it was handled.
- Calendar the response deadline on the complaint, and check for an arbitration agreement and an employment practices liability (EPLI) policy, since coverage for punitive damages raises its own questions.
- Identify every manager and executive who touched the decision or later reviewed it, along with their actual authority over company policy.
- Map the company’s organizational structure for the relevant period, so the managing agent question can be answered with documents and not just job titles.
- Get legal advice before an executive comments on the decision, reviews it internally, or contacts the employee, since a late review can be framed as ratification.
The firm’s post on EPLI claim tenders covers the insurance side. California employment defense lawyers at the firm handle punitive damages claims as part of the overall defense of the case.
Punitive damages questions employers ask
Is a store manager or regional manager a managing agent?
It depends on the job, not the title. White found a zone manager over eight stores and dozens of employees was a managing agent because her superiors delegated most of the responsibility for those stores to her. A store manager who follows detailed corporate policies set elsewhere has a better argument. The evidence is the person’s real authority, so job descriptions and reporting lines matter.
Does our HR department’s approval of a firing count as ratification?
It can, if the person approving is an officer or managing agent and knew of the wrongful conduct. Routine sign-off by an HR generalist usually isn’t enough by itself. The risk rises when a senior executive reviews a complaint about the decision and leaves it in place without investigating. Documented independent review is the best protection.
Can punitive damages be awarded in a wage claim?
Wage claims based on contract generally don’t support punitive damages, because section 3294(a) applies to “the breach of an obligation not arising from contract.” Wage and hour cases have their own statutory penalties instead. Punitive claims are far more common in wrongful termination and retaliation suits.
Should we settle because the complaint asks for punitive damages?
Not for that reason alone. Many employment complaints ask for them, and the clear and convincing standard and the managing agent rule screen out many. The better question is whether the evidence ties the decision to someone at the policy level. If it does, punitive exposure should factor into settlement value.
If your company faces a punitive damages claim
If your company has been sued by a former employee seeking punitive damages, who made the decision and who reviewed it afterward usually decide how much of that claim is real. Rosenberger + Kawabata represents employers defending employment lawsuits and claims through its business litigation practice, including claims involving punitive damages and managing agent liability. Contact Rosenberger + Kawabata online for a confidential consultation, or call (310) 894-6921.
Sources
The statutes are Civil Code section 3294 and Civil Code section 3295. The cases are White v. Ultramar, Inc. (1999) 21 Cal.4th 563 and Roby v. McKesson Corp. (2009) 47 Cal.4th 686.
This post is general information about California and federal employment law as of November 7, 2026. It is not legal advice, and reading it does not create an attorney-client relationship. Employment statutes, regulations, and court decisions change often, and the outcome of any claim depends on its facts. Past results do not guarantee future outcomes.