Honda Canada Inc v Keays

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Honda Canada Inc v Keays
Supreme court of Canada in summer.jpg
Hearing: 20 February 2008
Judgment: 27 June 2008
Full case nameHonda Canada Inc. operating as Honda of Canada Mfg. v. Kevin Keays
Citations 2008 SCC 39, [2008] 2 SCR 362
Docket No.31739 [1]
Prior historyAPPEAL and CROSS‑APPEAL from Keays v. Honda Canada Inc., 2006 CanLII 33191 (29 September 2006), Court of Appeal (Ontario,Canada), reversing in part Keays v. Honda Canada Inc., 2005 CanLII 8730 (17 March 2005), Superior Court of Justice (Ontario,Canada)
RulingAppeal allowed in part, Justices LeBel and Fish dissenting in part. Cross‑appeal dismissed.
Holding
No presumptions about the role that an employee's managerial level plays should be adopted in determining reasonable notice on termination of employment.

Damages resulting from the manner of dismissal will be available if they result from the circumstances described in Wallace v. United Grain Growers Ltd. , and such damages should be awarded through an award that reflects actual damages rather than by extending the notice period.

Contents

Court membership
Chief Justice: Beverley McLachlin
Puisne Justices: Michel Bastarache, Ian Binnie, Louis LeBel, Marie Deschamps, Morris Fish, Rosalie Abella, Louise Charron, Marshall Rothstein
Reasons given
MajorityBastarache, joined by McLachlin, Binnie, Deschamps, Abella, Charron, and Rothstein
Concur/dissentLeBel, joined by Fish

Honda Canada Inc v Keays, 2008 SCC 39 , [2008] 2 SCR 362 is a leading case of the Supreme Court of Canada that has had significant impact in Canadian employment law, in that it reformed the manner in which damages are to be awarded in cases of wrongful dismissal and it declared that such awards were not affected by the type of position an employee may have had.

Background

Widespread use of the "Wallace bump"

In Wallace v United Grain Growers Ltd , the Supreme Court held that bad faith on the part of an employer in how it handled the termination of an employee was another factor that is properly compensated for by an addition to the period of reasonable notice. Such an increase came to be known as the "Wallace bump," [2] and claims that included it became so frequent that the courts began to criticize the practice. [2] In Yanez v. Canac Kitchens, [3] Echlin J declared:

[39] It has been long accepted that employers should be discouraged from asserting "soft" cases of just cause. Indeed, there are sanctions against counsel and their clients who assert cause and then abandon it at the outset of trial.

[40] The time has now come to express this Court's disapproval of routine assertions of "Wallace damage" claims which are not justified by the facts.

[41] Such claims seriously impede the potential consensual resolution of disputes which could otherwise be settled well short of trial. Additionally, the assertion and defence of specious "Wallace claims" can consume large amounts of valuable court time; can increase the costs to all concerned; and can generally drive the parties apart.

[42] While these comments are not, in any way, intended to discourage meritorious "Wallace damage claims", thought must be given in future cases to appropriate deterrents against plaintiffs who assert "Wallace claims" which are clearly without merit and should not have been advanced. Sanctions could include a diminution of either the costs award or the amount awarded for such dismissal claims. Unmeritorious "Wallace claims" for bad faith firings ought not to be an apparently automatic inclusion in every plaintiff's prayer for relief.

[43] I make no reduction in the amount awarded to this plaintiff in this instance, nor do I reduce the amount granted for costs. However, in future cases, clearly unmeritorious claims for "Wallace damages", having little or no foundation on the evidence, may well face sanctions.

The case at hand

Keays was hired in 1986 by Honda of Canada Manufacturing in Alliston, Ontario, to work first on the assembly line and later in data entry. In 1997 he was diagnosed as having chronic fatigue syndrome, upon which he ceased work and received disability insurance benefits until 1998, when the insurance company determined that he could return to work full‑time. Keays continued to absent himself, and was placed in Honda's disability program, wherein absence was allowed with proof it was related to a disability.

Subsequent absence proved to be of longer duration than indicated in notes from his doctor(s). In 2000 Honda asked Keays to meet with an occupational medicine specialist to determine how his disability could be accommodated. Before a meeting could be arranged, Keays retained counsel out of concern that he would ultimately be terminated. His counsel sent a letter outlining his concerns and offering to work toward resolution. Honda did not respond.

In its meeting with Keays, Honda expressed concern over deficiencies in the notes from Keays' doctor(s), and advised in such matters they deal with associates directly and not with third-party advocates. The next day, Keays told Honda that, on the advice of counsel, he would not meet with the specialist without explanation of the purpose, methodology, and parameters of the consultation. Keays did not come to work for a week following this incident. On his return, he was given a written warning that failure to meet with the specialist would result in his termination. He refused to do so, and Honda terminated his employment. Keays subsequently sued Honda for wrongful dismissal.

The courts below

At first instance

The Ontario Superior Court of Justice ruled in favour of Keays. Justice John McIsaac concluded that Honda bore the burden to show just cause for termination and that it had failed to carry that burden. Specifically, he ruled:

In the Court of Appeal

The Court of Appeal for Ontario dismissed the appeal, but reduced the amount of punitive damages to $100,000.

National debate

Keays granted the largest award of punitive damages in a wrongful dismissal case in Canadian judicial history, and it created considerable discussion as to whether it was a harbinger of things to come. [12] It was also argued that the Court of Appeal ruling could be used in support of expanded damage awards at arbitration and before human rights tribunals. [13]

Leave to appeal

In March 2007, leave to appeal was granted with costs in any event of the cause by the Supreme Court of Canada: [14]

At the Supreme Court

The appeal was allowed in part, and the cross-appeal was dismissed. The damages for conduct in dismissal and punitive damages awards were set aside. At other levels, costs should be at a partial indemnity scale and the cost premium set aside. [15]

Before analyzing the case, Justice Michel Bastarache observed that the trial judge made several "palpable and overriding errors", which made it necessary to review the record in some detail. [16] The case also presented an opportunity "to clarify and redefine some aspects of the law of damages in the context of employment", and more specifically: [17]

  1. What factors should be considered when allocating compensatory damages in lieu of notice for wrongful dismissal.
  2. The basis for and calculation of damages for conduct in dismissal.
  3. The need to avoid overlap of damages for conduct in dismissal and punitive damage awards.

Damages in the context of employment

Justice Bastarache held that:

Majority in the appeal

In the case at hand:

Dissent in the appeal

While agreeing with the majority with respect to setting aside the punitive damages and cost premium, Justice Louis LeBel believed that the award of additional ("Wallace") damages should stand, as there was ample evidence to support the trial judge's conclusion that Honda acted in bad faith. [31]

Impact

Keays has attracted considerable debate and controversy:

Determination of "bad faith" by employers

Subsequent jurisprudence has identified several key areas where an employer's conduct will constitute bad faith that will attract Wallace damages: [40]

  1. Making false accusations,
  2. Damaging the employee's prospects of finding another job,
  3. Misrepresenting the reasons for termination,
  4. Firing the employee to ensure deprivation of a benefit, and
  5. Firing the employee in front of coworkers.

Award of Wallace damages after Keays

While the effect of Keays was to ensure that Wallace damages be reserved for special cases and not be handed out as a matter of course, post-Keays cases are revealing significant trends: [41]

  1. Employees have been suingsuccessfully in many casesfor an extension of the notice period as Wallace damages even after Keays. [42]
  2. Courts seem to be ignoring Keays and basing Wallace damages on the employer's bad faith conduct alone without looking at evidence of the actual mental distress the conduct actually inflicted on the employee. [43]
  3. There is evidence that Wallace damages are increasing in value. [44]
  4. Wallace damages are being applied to other kinds of losses the employee actually suffers as a result of the employer's conduct, but there is resistance in the appellate courts as to whether they are appropriate. [44]

Notes

  1. as defined in Wallace
  2. citing McKinley v. BC Tel, 2001 SCC 38, [2001] 2 SCR 161(28 June 2001)
  3. Bardal v. Globe & Mail Ltd. (1960), 24 DLR (2d) 140, adopted in Machtinger v. HOJ Industries Ltd., 1992 CanLII 102, [1992] 1 SCR 986(30 April 1992)
  4. Addis v Gramophone Co Ltd [1909] UKHL 1, [1909] AC 488(26 July 1909), affirmed in Peso Silver Mines Ltd. (N.P.L.) v. Cropper , 1966 CanLII 75, [1966] SCR 673(20 June 1966) and Vorvis v. Insurance Corporation of British Columbia, 1989 CanLII 93, [1989] 1 SCR 1085(4 May 1989)
  5. Fidler v. Sun Life Assurance Co. of Canada , 2006 SCC 30 at par. 49 and 54, [2006] 2 SCR 3(29 June 2006), based on Hadley v Baxendale , (1854) 9 Ex 341, 156 ER 145
  6. according to the criteria in Whiten v. Pilot Insurance Co. , 2002 SCC 18, [2002] 1 SCR 595(22 February 2002)
  7. as held in Seneca College v. Bhadauria , 1981 CanLII 29, [1981] 2 SCR 181(22 June 1981)

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References

  1. SCC Case Information - Docket 31739 Supreme Court of Canada
  2. 1 2 Shapiro & Hart 2010, p. 4.
  3. Yanez v Canac Kitchens, 2004 CanLII 48176 , [2004] OJ 5238(16 December 2004), Superior Court of Justice (Ontario,Canada)
  4. ONSC, par. 48
  5. ONSC, par. 49
  6. Human Rights Code , RSO 1990, c. H.19 ( Human Rights Code at ServiceOntario)
  7. ONSC, par. 50
  8. ONSC, par. 51
  9. ONSC, par. 57
  10. ONSC, par. 65
  11. SCC, par. 12
  12. Carman J. Overholt (December 2006). "The availability of punitive damages arising from the breach of human rights legislation: Keays v. Honda". Canadian Bar Association. Archived from the original on 20 April 2013.
  13. Kate A. Hughes (31 October 2006). "Significant Human Rights Decision Upheld at Court of Appeal: Keays v. Honda". Cavaluzzo Shilton McIntyre Cornish LLP.
  14. Honda Canada Inc. operating as Honda of Canada Mfg. v. Kevin Keays, 2007 CanLII 10545 (29 March 2007)
  15. SCC, par. 80
  16. SCC, par. 19
  17. SCC, par. 2124
  18. SCC, par. 2829
  19. SCC, par. 30
  20. SCC, par. 50
  21. SCC, par. 5455
  22. SCC, par. 57, quoting Wallace, par. 98
  23. SCC, par. 58
  24. SCC, par. 59
  25. SCC, par. 62
  26. SCC, par. 6768
  27. SCC, par. 63
  28. SCC, par. 78
  29. Walker v. Ritchie, 2006 SCC 45 , [2006] 2 SCR 428(13 October 2006)
  30. SCC, par. 79
  31. SCC, par. 114117
  32. Christopher Bird (10 July 2008). "Keays v. Honda Canada: The SCC Says Employer Intimidation Is Just Fine!". thecourt.ca. Archived from the original on 27 April 2014. Retrieved 26 April 2014.
  33. 1 2 Edmonds 2009.
  34. Fitzgibbon 2009.
  35. 1 2 3 Lublin 2009.
  36. Evans v. Teamsters Local Union No. 31, 2008 SCC 20 , [2008] 1 SCR 661(1 May 2008)
  37. Veel 2009.
  38. Shapiro & Hart 2010, p. 21.
  39. Côté 2008, p. 2.
  40. "Wrongful Dismissal". HRInsider.ca. 30 September 2010. Archived from the original on 26 April 2014. Retrieved 26 April 2014.
  41. "Wrongful Dismissal - The New Face of Wallace Damages". hrinsider.ca. 23 November 2010. Archived from the original on 27 April 2014. Retrieved 27 April 2014.
  42. Slepenkova v. Ivanov, 2009 ONCA 526 (25 June 2009)
  43. Brien v. Niagara Motors Limited, 2008 CanLII 41823 (20 August 2008), Superior Court of Justice (Ontario,Canada)
  44. 1 2 Soost v. Merrill Lynch Canada Inc., 2009 ABQB 591 (13 October 2009); appeal allowed in part in Merrill Lynch Canada Inc. v. Soost, 2010 ABCA 251 (27 August 2010)

Further reading