When the Supreme Court of Canada awarded Kevin Keays $500,000 in punitive damages on top of damages equal to fifteen months' reasonable notice in the 2008 case, Honda Canada Inc. v. Keays ("Keays"), it became one of the most controversial decisions to come out of Canada's highest court in over a decade. (1) Employees and their representatives viewed the decision as adding another arrow to their quiver, particularly as regards punitive damages, but the case opened the door to a number of new questions and problems. While mainstream media seized, with some reason, upon the unprecedented punitive damages award, in reality that was only one of the important employment law issues dealt with in the contentious decision.
The principles and underlying approach taken by the trial judge withstood a challenge before Ontario Court of Appeal, though the Court reduced the punitive damages award from $500,000 to $100,000, which served to heighten anxiety among employers general.
When the Supreme Court of Canada granted leave to appeal and cross-appeal both sides expected that the Court would provide some needed direction to all stakeholders. It is unlikely that anyone fully anticipated the broad and sweeping impact the decision would ultimately have in wrongful dismissal law. The Court took the opportunity to emphasize the proper considerations when awarding damages in employment law cases and, in so doing, adopted an approach that was principled, reasoned and had as its foundation a well-established judicial methodology. In short, the Court "pulled back on the reins", clearly re-establishing the principles to be applied by lower courts when awarding damages in employment law cases. This is a welcome decision that demonstrates how far the Supreme Court is prepared to go in order to "right the ship" where it believes lower courts have misapplied or otherwise extended principles established by the highest court beyond what was reasonably intended.
An understanding of the subtext is as important as the main findings in order to grasp the practical significance of Keays.
Kevin Keays commenced employment with Honda Canada Inc. ("Honda") in 1986 working on the production line at the assembly plant in Alliston, Ontario. After approximately twenty months, Mr. Keays joined the Quality Engineering Department. Mr. Keays was selected to receive training on a new computer system, created for the implementation of newly designed components into Honda vehicles, after which he was expected to instruct his fellow employees in the department on using the system.
Shortly after commencing work at Honda, Mr. Keays was absent from work as a result of health problems, which culminated in a disability leave in October of 1996. Honda's business philosophy mandated a "lean" operating structure such that Mr. Keays' absences required his already busy co-workers to take on his responsibilities in addition to their own. Mr. Keays was diagnosed as suffering from chronic fatigue syndrome ("CFS") and though he returned to work in December of 1998, he did so under protest and then only upon the termination of his benefits by Honda's long-term disability insurer.
Within a month of returning to work Mr. Keays once again began to experience absences from work, and in August of 1999 received a written "coaching" report from Honda with respect to his absenteeism. This was the first step in Honda's progressive discipline process. When Mr. Keays complained that he was not able to live up to Honda's attendance expectations, be was informed of a Honda program exempting employees from attendance-related progressive discipline based on a disability. Mr. Keays' had his physician complete the necessary forms and informed Honda that he suffered from CFS and would likely miss about four days of work per month as a result.
Honda provided some accommodation for Mr. Keays' absences, but he was required to provide a doctor's note for each absence, a requirement not imposed on other employees. Following a six-day absence in October of 1999, Honda asked Mr. Keays to see the company doctor. When Mr. Keays later complained to his supervisors that the doctor had threatened to move him back to the production line, the supervisors told Mr. Keays that there was no intention to move him "at that time".
In January and February of 2000 Mr. Keays requested that the written "absenteeism" report be removed from his file and that Honda reconsider the requirement that he provide a doctor's note for each absence. Mr. Keays retained counsel and his lawyer wrote to Honda outlining Mr. Keays' concerns and extending an offer to attempt to resolve their differences. Honda had an unwritten policy discouraging third parties advocating on behalf of employees and therefore did not respond to this letter. Instead, Honda informed Mr. Keays that it no longer accepted that he had a disability requiring him to be absent, and directed him to meet with Honda's occupational medicine specialist.
Mr. Keays informed Honda that on the advice of his lawyer, he would not meet with the occupational medicine specialist unless and until he was provided with clarification regarding the "purpose, methodology and the parameters of the assessment." Honda refused to elaborate on the purpose of the meeting and warned Mr. Keays that if he did not meet with the doctor he would be terminated.
Honda terminated Mr. Keays' employment when he did not meet with the doctor as instructed. Subsequent to his dismissal, Mr. Keays suffered from post-traumatic adjustment disorder, was unable to work, and qualified for a total disability pension.
KEAYS AT TRIAL AND APPEAL
At trial, McIsaac J criticized Honda, in pointed and indeed scathing terms, for what he viewed as its harsh treatment of Mr. Keays. Ultimately, this criticism was not sufficiently founded to justify the "non-traditional" damages awards discussed in more detail below.
McIsaac J found that Honda's direction that Mr. Keays meet with the occupational medicine specialist was unreasonable, not made in good faith and was done in order to subsequently terminate Mr. Keays' employment and avoid accommodating his disability. The trial judge determined that Mr. Keays had good reason not to comply with Honda's directives, and his refusal to see the company doctor was not a repudiation of his contract of employment justifying the termination of his employment for just cause. McIsaac J held that Honda's reaction to Mr. Keays' refusal to meet with its doctor was disproportionate. Not only did Honda not have just cause to terminate Mr. Keays, the trial judge also found that Honda had failed to fulfill its obligations to Mr. Keays under the Code. He described the company's conduct as "outrageous" and deserving of significant denunciation.
As a result, McIsaac J awarded punitive damages in the unprecedented amount of $500,000 for what he considered to be Honda's "outrageous and high-handed" conduct that amounted to discrimination and harassment. He also determined that the period of reasonable notice, in the circumstances, was fifteen months' salary, which he extended by nine months because of the "egregious bad faith displayed by Honda" in the manner in which Mr. Keays' employment was terminated and "the medical consequences flowing therefrom".
Honda appealed and in a split decision, the Ontario Court of Appeal sety aside the quantum of punitive damages and the cost premium awarded at trial, but otherwise left the trial judgment undisturbed.
Honda argued, in part, that the trial judgment "flew in the face of" Seneca College of Applied Arts and Technology v. Bhadauria ("Bhadauria"). (2) The Court of Appeal disagreed and Goudge JA, in dissent, stated that:
Bhadauria determined that a civil action could not be based directly on a breach of the Ontario Human Rights Code. Indeed, in this case the respondent made just such a claim, which the trial judge dismissed, albeit reluctantly, by applying both Bhadauria and this court's recent application of that decision in Taylor v. Bank of Nova Scotia. In other words, the conduct in the context of a claim for punitive damages was not being advanced in support of a breach of the Code but as an "independent actionable wrong" and, on the evidence, an award of punitive damages was warranted. In terms of assessing the quantum of the punitive damage award, Goudge JA considered the following:
* The level of blameworthiness of the employer's conduct;
* The degree of vulnerability of the employee;
* The harm to the employee; and
* The need for deterrence.
Goudge JA would have upheld the $500,000 in punitive damages award. Rosenberg JA, writing on behalf of himself and Feldman JA, agreed with Goudge JA in all respects save with respect to the quantum of punitive damages. The majority agreed with Gouge J.A.'s summation of the law after Bhadauria and, specifically, that a breach of human rights legislation could be relied upon as the actionable wrong in support of a claim for punitive damages.
That said, the majority reduced the award from $500,000 to $100,000 because the trial judge relied on findings of fact not supported by the evidence and because the award failed to accord with the fundamental principle of proportionality.
Erroneous factual findings made by and relied upon by the trial judge were the following: (3)
Honda's misconduct was "planned and deliberate and formed a protracted corporate conspiracy". The majority found that there was no evidence to support this allegation of a broad-based conspiracy.
Honda's "outrageous conduct has persisted over a period of five years without a hint of modification of their position that Mr. Keays was the one in the wrong." The majority characterized this as a "gross distortion of the circumstances and amounts to a palpable and overriding error." There was no evidence to support the trial judge's view that the "outrageous conduct" persisted over a period of five years. The majority concluded...