Canadian Lawyer InHouse

Oct/Nov 2008

Legal news and trends for Canadian in-house counsel and c-suite executives

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Page 31 of 47

FROM THE PROFESSION Honda driven to litigation success By Pamela Yudcovitch and Andy Balaura punitive damages awards ever granted at trial to a wrongfully dismissed employee. The case is very favourable for employers and represents a significant judicial shi┼┐t to limit the scope of damages awarded in wrongful dismissal cases. I FACTS Kevin Keays was employed by Honda Canada Inc. for approximately 11 years before he was diagnosed with Chronic Fatigue Syndrome in 1997. He ceased work and received disability benefits un- til 1998, when Honda's insurer discontin- ued his benefits. Keays returned to work and was placed in a disability program that allowed employees to take absences from work on the condition that they produced a doctor's note confirming that their absences were related to their dis- ability. Upon his return to work, Keays was chronically absent because of his disability, but for just a few days at a time. Honda became concerned about the fre- quency of Keays' absences and requested a medical evaluation to determine how his disability could be accommodated. On the advice of his lawyer, Keays re- fused to meet with the medical expert without explanation of the purpose, methodology, and parameters of the con- sultation. Honda refused to deal with Ke- ays' lawyer and, on March 28, 2000, ad- vised Keays that his employment would be terminated if he refused to meet with their medical expert. When Keays con- tinued to refuse to meet with the doctor, n the much anticipated and land- mark case of Honda Canada Inc. v. Keays, the Supreme Court of Can- ada overturned one of the largest Honda formally terminated his employ- ment for insubordination. Keays then sued Honda for wrongful dismissal. JUDICIAL HISTORY At trial, the Ontario Superior Court found there was no just cause for the termination of Keays' employment and awarded him 15 months' pay in lieu of notice. In addition, the trial judge extend- ed the notice period by nine months on finding that Honda acted in bad faith in the manner it terminated Keays' employ- ment. Keays was also awarded $500,000 in punitive damages on the basis that he had been harassed and discriminated against by Honda in an "outrageous man- ner." The trial judge found that Keays had been terminated from employment so that Honda could avoid its obligation to accommodate Keays' disability under the Ontario Human Rights Code. On appeal, the Ontario Court of Appeal upheld the trial judgment in all respects, except for the amount of punitive damag- es. It agreed with the 24-month reasonable notice and bad-faith damages awarded by the trial judge. It also confirmed that a claim for discrimination or harassment under the Ontario Human Rights Code could constitute an "independent action- able wrong" necessary to support an award of punitive damages. However, the court reduced the punitive damage award to $100,000 because it disagreed with some findings of fact made by the trial judge. SUPREME COURT RULING In its June decision, the Supreme Court of Canada clarified and redefined some 32 OC T OBER 2008 C ANADIAN Lawyer INHOUSE aspects of the law of damages in the con- text of employment law. The case is es- pecially significant in the areas of "puni- tive" and "bad-faith" damages. Bad-faith (Wallace) damages Although upholding the notice award, the SCC overturned the additional award of nine months' pay for the bad- faith manner in which Honda had been found to have dismissed Keays. This type of damage award "extending" no- tice had been approved by the court in a previous case, Wallace v. United Grain Growers Ltd. The court found that Honda's conduct during the course of dismissal was not egregiously unfair or in bad faith by being, for example, untruthful, misleading, or unduly in- sensitive. It found that Honda should not have been faulted for relying on the advice of its medical experts, for re- questing to meet with Keays to discuss his absences, or for seeking to confirm his disability. More significantly, the court held that any damages for bad-faith con- duct should be awarded only through an award that reflects actual damages, rather than by an "arbitrary exten- sion" of the notice period. The court expressed concern about the overlap of damages awarded by the lower courts and held that damages for psychologi- cal injury in the context of dismissal are intended to be compensatory. Therefore, courts should avoid the pitfall of making overlapping damage awards for both bad-faith and for ag- gravated damages.

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