Honda v Keays

The Supreme Court of Canada released its decision in Honda Canada Inc. v. Keays 2008 SCC 39 this morning. The summary appears below.

K had worked 11 years for the same employer, first on an assembly line and later in data entry, when, in 1997, he was diagnosed with chronic fatigue syndrome. He ceased work and received disability benefits until 1998, when his employer's insurer discontinued his benefits. K returned to work and was placed in a disability program that allows employees to take absences from work if they provide doctor's notes confirming that their absences are related to their disability. K's employer became concerned about the frequency of his absences. Moreover, the notes K offered to explain his absences changed in tone, leaving the employer to believe that the doctor did not independently evaluate whether he missed work due to disability. As such, the employer asked K to meet Dr. B, an occupational medical specialist, in order to determine how K's disability could be accommodated. On the advice of his counsel, K refused to meet B without explanation of the purpose, methodology and parameters of the consultation. In March 28, 2000, the employer gave K a letter stating that it supported K's full return to work but that K's employment would be terminated if he refused to meet B. When K remained unwilling to meet B, the employer terminated K's employment. K sued for wrongful dismissal. The trial judge found that K was entitled to a notice period of 15 months. He held that the employer had committed acts of discrimination, harassment and misconduct against K. He increased the notice period to 24 months to award additional damages dependent on the manner of dismissal. He also awarded punitive damages against the employer in the amount of $500,000, a costs premium, and costs on a substantial indemnity scale. The Court of Appeal reduced the costs premium and, in a majority decision, reduced the punitive damages award to $100,000. The Court of Appeal otherwise upheld the trial judge's decision. Held (LeBel and Fish JJ. dissenting in part on the appeal): The appeal should be allowed in part and the cross-appeal should be dismissed.

The award of aggravated damages for manner of dismissal and the award of punitive damages should be set aside. The cost premium should be set aside and costs should be adjusted to reflect an award on the regular scale in the lower courts. Costs are awarded to the employer at the Supreme Court level. Per McLachlin C.J. and Bastarache, Binnie, Deschamps, Abella, Charron and Rothstein JJ.: K was wrongfully dismissed and the award of damages reflecting the need for 15 months' notice should be maintained. In determining what constitutes reasonable notice of termination, courts should consider the character of the lost employment, the employee's length of service, the age of the employee, and the availability of similar employment having regard to the experience, training and qualifications of the employee. These factors can only be applied on a case-by-case basis and no one factor should be given disproportionate weight. No presumptions about the role that an employee's managerial level plays should be adopted in determining reasonable notice. The trial judge erred in alluding to the employer's flat management structure rather than examining K's actual functions; however, on the facts of this case there is no basis to interfere with the assessment of 15 months' notice.

An action for wrongful dismissal is based on an implied obligation in the employment contract to give reasonable notice of an intention to terminate the relationship in the absence of just cause. Generally, damages are not available for the actual loss of a job or for pain and distress suffered as a consequence of being terminated. However, in cases where parties have contemplated at the time of the contract that a breach in certain circumstances would cause the plaintiff mental distress, the plaintiff is entitled to recover. This is consistent with the view expressed in Findler that all compensatory damages for breach of contract are assessed under one rule, i.e., what was in the reasonable contemplation of the parties (Hadley v. Baxendale). In the employment law context, damages resulting from the manner of dismissal will be available if they result from the circumstances described in Wallace, namely where the employer engages in conduct during the course of dismissal that is "unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive". These damages should be awarded through an award that reflects actual damages rather than by extending the notice period.

Aggravated damages should not have been awarded in this case. The employer's conduct in dismissing K was in no way an egregious display of bad faith justifying an award of damages for conduct in dismissal. On this issue, the trial judge made overriding and palpable errors of fact. The employer's March 28 letter to K did not misrepresent the positions of its doctors and it should not have been faulted for relying on the advice of its medical experts. There is no evidence that B took a "hard-ball" attitude towards workplace absences or that K was being set up when asked to meet B. The employer's request for a meeting between K and B was normal in the circumstances. The employer's decision to stop accepting doctor's notes was not reprisal for K's decision to retain legal counsel. Rather, the employer was simply seeking to confirm K's disability. Lastly, there is no evidence that K's disability subsequent to termination was caused by the manner of termination.

Similarly, punitive damages should not have been awarded. Punitive damages are restricted to advertent wrongful acts that are so malicious and outrageous that they are deserving of punishment on their own. The facts of this case demonstrate no such conduct. Courts should only resort to punitive damages in exceptional cases and the employer's conduct here was not sufficiently egregious or outrageous to warrant such damages. Even if the facts had justified an award of punitive damages, both the trial judge and the Court of Appeal should have been alert to the fact that the compensatory damages already awarded carried, under the old test, an element of deterrence and they should have questioned whether punitive damages were necessary. This failure resulted in considerable and unnecessary duplication in the award of damages.

Both the trial judge and the Court of Appeal also erred in concluding that the employer's "discriminatory conduct" amounted to an independent actionable wrong for the purposes of allocating punitive damages. The Ontario Human Rights Code provides a comprehensive scheme for the treatment of claims of discrimination. A breach of the Code cannot constitute an actionable wrong; therefore the legal requirement for the common law remedy of punitive damages is not met. Since there is no evidence of discrimination to support a claim of discrimination under the Code and no breach of human rights legislation serves as an actionable wrong, there is no need to deal with K's request for recognition of a distinct tort of discrimination.