Canada: Supreme Court Of Canada - Honda v. Keays

Last Updated: July 9 2008
Article by Andrea F. Raso-Amer and Kristin R. Taylor

Today, the Supreme Court of Canada released its long awaited decision in Honda v. Keays and the news is good for employers.

The case involved a 14 year employee of Honda Canada Inc., Kevin Keays, who developed chronic fatigue syndrome. After a two year absence on disability leave, Keays returned to work under protest that he was still too sick to do so. His attendance record was poor due to a significant amount of intermittent absences. This resulted in disciplinary "coaching" by Honda. Honda initially accommodated Keays' disability, but did require Keays to provide a doctor's note validating each absence before he could return to work. According to Keays, this prolonged his absences. Keays sought to have the "coaching" removed from his record and the requirement to provide a doctor's notes vacated. When he was stonewalled by Honda, he retained a lawyer to represent his interest. Rather than respond to the letter, Honda met with Keays and asked him to meet with an occupational medical specialist. During this same meeting, Honda advised Keays that it no longer accepted that he had a disability that required him to be absent and stated that its company physician as well as the occupational medical specialist believed he could attend work on a regular basis. Following the meeting, Keays requested clarification of the purpose, methodology and parameters of the proposed assessment by the occupational medical specialist. Honda refused to provide any further information and warned Keays that if he failed to attend the assessment, his employment would be terminated. Keays did not attend the assessment and was dismissed.

At trial, the Court award Keays 15 months' reasonable notice plus an additional nine months to deal with Honda's egregious bad faith for a total notice period of 24 months. In addition, the Court awarded Keays punitive damages in the amount of $500,000 to punish Honda for its outrageous and high-handed conduct and because the basis for the dismissal constituted discrimination and harassment in employment.

The Ontario Court of Appeal largely supported the decision of the trial judge, but reduced the award of punitive damages from $500,000 to $100,000. The Court of Appeal agreed that a 15 month notice period with a nine month Wallace extension for bad faith was appropriate. Further, even if a civil action could not be based directly on a breach of the Ontario Human Rights Code, a breach of human rights can constitute an independent wrong actionable necessary to support an award of punitive damages.

Today, in a 7:2 split, the Supreme Court of Canada overturned the Court of Appeal Decision on several fronts. The Court used the decision as an "opportunity to clarify and redefine some aspects of the law of damages in the context of employment." The findings of the majority, led by the Honourable Mr. Justice Bastarache, are as follows:

1. No Extension of Reasonable Notice Based on Wallace

Based on the traditional factors of assessing reasonable notice (i.e., length of service, age of the employee, character of employment, and the availability of similar employment), the Court found there was no basis to interfere with the assessment of 15 months' notice. However, the Court found that there should be no extension of the notice period based on the Wallace factor. Significantly, the Court held that any damages for conduct by an employer during the course of dismissal, which is unfair or in bad faith, should be awarded only through an award of compensatory or aggravated damages – if the employee can prove that the manner of dismissal caused actual damages such as mental distress – rather than by an "arbitrary extension" of the notice period.

In this case, the Court held that aggravated or compensatory damages ought not to have been awarded. The employer should not have been faulted for relying on the advice of its medical experts, requesting to meet with Keays to discuss his absences, or seeking to confirm his disability. Further, there was no evidence to support that Keays' disability was caused by the manner of termination.

2. No Independent Actionable Wrong Based on Human Rights Legislation

The Court held that the Ontario Human Rights Code contains "a comprehensive scheme for the treatment of claims of discrimination". A breach of human rights legislation cannot constitute an independent actionable wrong to support a claim for punitive damages in the civil courts. Further, the Court declined to deal with the issue of discrimination as a distinct tort, which would sidestep the statutory regime of human rights legislation.

The Court held that there was no discriminatory conduct in this case. The employer's disability program was designed to accommodate particular types of disabilities and was not itself discriminatory.

3. No Punitive Damages

The Court held that punitive damages ought not to have been awarded to Keays. Punitive damages are reserved for the rare and exceptional case where the employer's conduct is so malicious, outrageous and egregious to warrant sanction by the Court. Creating a disability program, such as the one in this case, cannot be equated to malicious intent to discriminate against employees with particular disabilities. The need to monitor the absences of employees who are regularly absent from work is a bona fide management responsibility. The Court added that an award of damages for psychological injury in the context of dismissal is intended to be compensatory, and the Courts should avoid the pitfall of double compensation or double punishment that was exemplified in this case.

So, what does this decision mean for employers? First, it appears that there will no longer be "add on" notice periods for Wallace type conduct. While bad faith conduct can still merit a separate compensatory or aggravated award of damages, an employee will have to show that actual damages were incurred as a result of the employer's conduct in the manner of dismissal. Second, the bar for punitive damages has again been raised and will only be awarded for reprehensible conduct. Finally, this decision confirms that where an alleged breach of human rights legislation underlies a claim, the employee will have to seek recourse through the processes set out in the statute and may not seek relief in the Courts.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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