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The Supreme Court of Canada Taketh Away

Several years ago, an Ontario Court set a precedent by issuing one of the richest-ever wrongful dismissal awards in Canadian history. That case has climbed through the appeal system and the Supreme Court of Canada has now reined in the original award.
The employer, Honda Canada Inc., appeared to have sinned by their blind insistence on production efficiency at the expense of their obligation to accommodate an employee, Keays, who had been diagnosed with chronic fatigue syndrome. 
Keays had been a long-term employee at Honda’s Ontario production facility. He was found to be a dedicated and conscientious employee who had made his employment at Honda his life’s work. He had, however, experienced ongoing health problems which resulted in a medical leave and the collection of disability benefits.
After a couple of years, Keays’ disability benefits were abruptly terminated and his benefits appeal was dismissed despite his physician’s diagnosis of chronic fatigue syndrome. Forced to return to work, he experienced a pattern of increasing absences. The trial judge found that, upon his return, Honda “hounded” Keays over his rate of absences.
Keays retained a lawyer who wrote a letter to Honda in relation to the treatment the employee had experienced. Honda ignored the letter and, instead, ordered the employee to see the company’s doctor. The trial judge found this step to be simply a prelude to terminating his employment.
Keays refused to see the company’s doctor (he wanted clarification of the intended purpose, methodology, and parameters of that examination). Honda responded to his refusal by terminating his employment for insubordination.
The total damages, $650,000, included a record punitive damages award of $500,000. The trial judge referred to Honda’s conduct as a “protracted corporate conspiracy” of harassment, discrimination, and bad faith. He stated that, just because the employee “did not carry a white cane, use a hearing aid, or get around in a wheelchair, did not make him any less deserving of workplace recognition of his debilitating condition”.
That decision acknowledged the legitimacy of chronic fatigue syndrome as a disability and made it clear that employers would be held responsible for discriminatory treatment of affected employees. It served as a warning to employers which slavishly pursue lower and lower absenteeism figures.
At the first level of appeal, the Ontario Court of Appeal reduced the punitive damages award from $500,000 to $100,000.  The case was appealed to the Supreme Court of Canada which, in its decision, eliminated the punitive damages award altogether.
The Supreme Court of Canada did not agree that Honda had acted in an inappropriate manner in its dealings with Keays. It stated that Honda’s “conduct in dismissing Keays was in no way an egregious display of bad faith justifying” such an award of damages. 
The Court concluded “there simply was no conspiracy to terminate Keays”. While some of Honda’s conduct was found to have been “ill-advised and unnecessarily harsh”, the Court found it still did not warrant an award of punitive damages. The Court clarified that punitive damages are restricted to “advertent wrongful acts that are so malicious and outrageous that they are deserving of punishment on their own”.
Keays’ original award (which included 24 months wages in lieu of notice in addition to the $500,000 in punitive damages) was reduced to 15 months wages in lieu of notice.
The effect of this decision will surely be to raise the threshold at which lower courts can conclude an employer’s conduct towards an employee warrants punishment. Given the contrast between the original court’s findings and those of the Supreme Court of Canada, it may also create uncertainty about the ability of the lower courts to properly apply concepts such as the punitive damages rule.
Robert Smithson is a partner at Pushor Mitchell LLP in Kelowna practicing exclusively in the area of labour and employment law. For more information about his practice, log on to