Appeal finds no deliberate misconduct on Honda's part
Punitive damages are a rarity in employment law. Only the most extreme misbehaviour by employers will warrant them. When an Ontario court awarded a former Honda worker $500,000 in punitive damages after he was fired, it raised a lot of eyebrows — not for the fact damages were awarded, but because the amount was so high. So it wasn’t surprising when the Ontario Court of Appeal recently reduced that amount to $100,000.
Notwithstanding the significant reduction, the importance of this decision in the employment law realm can’t be overstated. While the amount awarded was slashed significantly, $100,000 isn’t small potatoes.
The Court of Appeal’s reasoning should put to rest any fear that every wrongful dismissal case will attract punitive damages. After all, the ruling confirms punitive damages will still likely be reserved for exceptional cases, such as an employer’s unwillingness to adhere to its duties in the workplace like the duty to accommodate.
But what remains to be seen is what impact the ruling will have on the amount of money awarded in cases where the employer demonstrates a harsh, unreasonable attitude in a time of crisis over a long period of time after the termination. Certainly, as the court stated, simply defending a wrongful dismissal claim cannot itself be misconduct giving rise to a punitive damages award. But if the employer defends itself by engaging in continuous misconduct after the wrongful dismissal, perhaps it will attract significant punitive damages.
Kevin Keays developed chronic fatigue syndrome shortly after he started working for Honda in Alliston, Ont. This necessitated several absences from work, as well as a need for long-term disability, for which the insurer eventually terminated his benefits.
After his benefits were terminated, Keays returned to work. Within a month of his return, the health issues resurfaced as did his absences. Keays was “coached” through written documentation, the first step in Honda’s progressive discipline policy. As a result of his repeated expressions that his illness prevented him from being at work, Honda offered a program to provide some accommodation for the disability, which required his doctor’s compliance. His doctor completed the form, advising that Keays would likely miss four days of work each month.
While Honda provided some accommodation for his disability, it also required Keays to provide medical documentation every time he was absent. When his absences exceeded his doctor’s predictions, Honda required him to see a company doctor. The requirements to provide valid medical documentation for his absences continued, as did the coaching required for Honda’s progressive discipline policy.
Keays hired a lawyer, who wrote to Honda about his concerns. Honda failed to respond to this letter, but instead required Keays to meet with the company’s occupational medicine specialist. Because Honda refused to provide Keays with the objectives of the meeting, the methodology being used and the parameters of the doctor’s assessment, Keays declined to attend the meeting. He received a letter advising that Honda did not “accept the need for your recent absence,” nor the need to explain the purpose of meeting with its doctor.
On the basis of his continued refusal to attend, Keays was terminated after 14 years on the job. He was told about his termination by a co-worker who phoned him after the dismissal was announced to the department. Keays suffered a three- or four-month period of post traumatic adjustment disorder, and was unable to work after the termination. He sued for wrongful dismissal.
He was awarded 15 months’ reasonable notice and an additional nine months for the bad-faith manner of the dismissal. Keays was also awarded $500,000 in punitive damages due to the trial judge’s finding that Honda’s treatment of him constituted discrimination and harassment, contrary to the Ontario Human Rights Code, and moreover was outrageous and high-handed. Honda appealed.
The Ontario Court of Appeal upheld the trial judge’s decision in all aspects, except for the amount of the legal costs and, more importantly, the amount of punitive damages. It found there were a number of findings of fact, relied upon by the trial judge, which were not supported by the evidence. Consequently, the Court of Appeal found:
•there was no planned and deliberate misconduct on the part of Honda, nor any that formed a protracted corporate conspiracy;
•the conduct had persisted over a period of seven months, not a period of five years as the trial judge had ruled;
•there was no outrageous conduct after Keays was dismissed, and defending a wrongful dismissal action cannot itself be misconduct giving rise to punitive damages;
•although medical notes were required for Keays which were not required for other employees with mainstream illnesses, it was only when the absences became more frequent and obtaining notes became more onerous for Honda, that matters began to “spiral out of control”;
•there was no evidence to support the fact Keays was viewed as a problem associate by Honda nor that the company benefited by ridding itself of the problem;
•Honda had not “run amok,” as the trial judge had found. In that regard, the Court of Appeal found that although the decisions Honda had made were wrong, there was no support for the “grave allegation of corporate malfeasance”; and
•while it might have been more prudent for in-house counsel to have left the room when Keays was meeting with his superiors, this should not be a factor in the decision for punitive damages.
The Court of Appeal also commented on the trial judge’s statement that “it takes a large whack to wake up a wealthy and powerful defendant to its responsibilities.” In so doing, it upheld the Supreme Court’s earlier remarks about the relative financial size of the defendant being a factor of “limited importance.” The court, however, also reiterated the Supreme Court’s earlier comments that a defendant’s financial power may be relevant if:
•the organization argues financial hardship;
•it’s directly relevant to the misconduct; or
•there are other circumstances where it may rationally be concluded that a lesser award would not achieve deterrence.
In the Court of Appeal’s review of the history of punitive damages awards, it found that cases of punitive damages have typically been in the range of $15,000 to $50,000. The two exceptions were the cases of Hill v. Church of Scientology of Toronto, a 1995 decision in which the court awarded $800,000 in punitive damages, and Whiten v. Pilot Insurance Company.
In this 2002 ruling, the Supreme Court of Canada upheld $1 million in punitive damages, awarded by a jury, given the finding that the insurance company had persisted in its course of conduct based on a theory that the plaintiffs deliberately set a fire to burn their house and collect insurance money, despite repeated findings from its own experts and advisors that the fire was accidental.
The Court of Appeal used both cases as a benchmark from which it arrived at its decision to reduce punitive damages from $500,000 to $100,000. It said a punitive damages award of the scale imposed by the trial judge could only be justified in extraordinary circumstances of a similar nature to those in Hill and Whiten. The court found the most useful comparator was the case of Whiten, given that it, too, was a contracts case.
In Whiten, the Supreme Court of Canada made clear that any punitive damages award must be proportionate to the blameworthiness of the defendant’s conduct. However, in arriving at that conclusion, the Court of Appeal in Keays found the Supreme Court of Canada had really focused on the duration of the misconduct in order to make its assessment: “The more reprehensible the conduct, the higher the rational limits to the potential award. The need for denunciation is aggravated where, as in this case, the conduct has persisted in over a lengthy period of time (two years to trial) without any rational justification, and despite the defendant’s awareness of the hardship it knew it was inflicting.”
In comparing Whiten to Keays, the court found the two factors which stood out were that:
•in Keays there was no two-year period of escalating misconduct up to the trial, given that it was only seven months and was focused largely on events prior to the termination; and
•in Whiten the defendant persisted in its course of conduct based on a theory that the plaintiff deliberately set the fire, despite the repeated findings from its own experts and advisors that the fire was accidental. In fact, the Supreme Court of Canada described the defendant’s attitude as being “harsh and unreasoning opposition” with an attempt to “exploit a family in crisis.” The Ontario Court of Appeal however, found that this was not the case in Keays.
The Ontario Court of Appeal found Honda’s intent to intimidate and terminate Keays, thereby depriving him of his right to be accommodated, was an act worthy of punitive damages, as was Honda’s awareness of its obligation to accommodate him, and not act in reprisal, as it did upon the termination.
Also the court made it clear that Keays’ dependence upon his employment for his benefits, and his particular vulnerability, were also factors worthy of support for punitive damages. In essence, the Ontario Court of Appeal sent a strong message to employers that they cannot avoid their duty to accommodate an employee’s disability and, if they do, there will be consequences.
Natalie MacDonald is a partner with Grosman, Grosman and Gale, a Toronto-based law firm specializing in employment law. She can be reached at (416) 364-9599 or [email protected].
Notwithstanding the significant reduction, the importance of this decision in the employment law realm can’t be overstated. While the amount awarded was slashed significantly, $100,000 isn’t small potatoes.
The Court of Appeal’s reasoning should put to rest any fear that every wrongful dismissal case will attract punitive damages. After all, the ruling confirms punitive damages will still likely be reserved for exceptional cases, such as an employer’s unwillingness to adhere to its duties in the workplace like the duty to accommodate.
But what remains to be seen is what impact the ruling will have on the amount of money awarded in cases where the employer demonstrates a harsh, unreasonable attitude in a time of crisis over a long period of time after the termination. Certainly, as the court stated, simply defending a wrongful dismissal claim cannot itself be misconduct giving rise to a punitive damages award. But if the employer defends itself by engaging in continuous misconduct after the wrongful dismissal, perhaps it will attract significant punitive damages.
Kevin Keays developed chronic fatigue syndrome shortly after he started working for Honda in Alliston, Ont. This necessitated several absences from work, as well as a need for long-term disability, for which the insurer eventually terminated his benefits.
After his benefits were terminated, Keays returned to work. Within a month of his return, the health issues resurfaced as did his absences. Keays was “coached” through written documentation, the first step in Honda’s progressive discipline policy. As a result of his repeated expressions that his illness prevented him from being at work, Honda offered a program to provide some accommodation for the disability, which required his doctor’s compliance. His doctor completed the form, advising that Keays would likely miss four days of work each month.
While Honda provided some accommodation for his disability, it also required Keays to provide medical documentation every time he was absent. When his absences exceeded his doctor’s predictions, Honda required him to see a company doctor. The requirements to provide valid medical documentation for his absences continued, as did the coaching required for Honda’s progressive discipline policy.
Keays hired a lawyer, who wrote to Honda about his concerns. Honda failed to respond to this letter, but instead required Keays to meet with the company’s occupational medicine specialist. Because Honda refused to provide Keays with the objectives of the meeting, the methodology being used and the parameters of the doctor’s assessment, Keays declined to attend the meeting. He received a letter advising that Honda did not “accept the need for your recent absence,” nor the need to explain the purpose of meeting with its doctor.
On the basis of his continued refusal to attend, Keays was terminated after 14 years on the job. He was told about his termination by a co-worker who phoned him after the dismissal was announced to the department. Keays suffered a three- or four-month period of post traumatic adjustment disorder, and was unable to work after the termination. He sued for wrongful dismissal.
He was awarded 15 months’ reasonable notice and an additional nine months for the bad-faith manner of the dismissal. Keays was also awarded $500,000 in punitive damages due to the trial judge’s finding that Honda’s treatment of him constituted discrimination and harassment, contrary to the Ontario Human Rights Code, and moreover was outrageous and high-handed. Honda appealed.
The Ontario Court of Appeal upheld the trial judge’s decision in all aspects, except for the amount of the legal costs and, more importantly, the amount of punitive damages. It found there were a number of findings of fact, relied upon by the trial judge, which were not supported by the evidence. Consequently, the Court of Appeal found:
•there was no planned and deliberate misconduct on the part of Honda, nor any that formed a protracted corporate conspiracy;
•the conduct had persisted over a period of seven months, not a period of five years as the trial judge had ruled;
•there was no outrageous conduct after Keays was dismissed, and defending a wrongful dismissal action cannot itself be misconduct giving rise to punitive damages;
•although medical notes were required for Keays which were not required for other employees with mainstream illnesses, it was only when the absences became more frequent and obtaining notes became more onerous for Honda, that matters began to “spiral out of control”;
•there was no evidence to support the fact Keays was viewed as a problem associate by Honda nor that the company benefited by ridding itself of the problem;
•Honda had not “run amok,” as the trial judge had found. In that regard, the Court of Appeal found that although the decisions Honda had made were wrong, there was no support for the “grave allegation of corporate malfeasance”; and
•while it might have been more prudent for in-house counsel to have left the room when Keays was meeting with his superiors, this should not be a factor in the decision for punitive damages.
The Court of Appeal also commented on the trial judge’s statement that “it takes a large whack to wake up a wealthy and powerful defendant to its responsibilities.” In so doing, it upheld the Supreme Court’s earlier remarks about the relative financial size of the defendant being a factor of “limited importance.” The court, however, also reiterated the Supreme Court’s earlier comments that a defendant’s financial power may be relevant if:
•the organization argues financial hardship;
•it’s directly relevant to the misconduct; or
•there are other circumstances where it may rationally be concluded that a lesser award would not achieve deterrence.
In the Court of Appeal’s review of the history of punitive damages awards, it found that cases of punitive damages have typically been in the range of $15,000 to $50,000. The two exceptions were the cases of Hill v. Church of Scientology of Toronto, a 1995 decision in which the court awarded $800,000 in punitive damages, and Whiten v. Pilot Insurance Company.
In this 2002 ruling, the Supreme Court of Canada upheld $1 million in punitive damages, awarded by a jury, given the finding that the insurance company had persisted in its course of conduct based on a theory that the plaintiffs deliberately set a fire to burn their house and collect insurance money, despite repeated findings from its own experts and advisors that the fire was accidental.
The Court of Appeal used both cases as a benchmark from which it arrived at its decision to reduce punitive damages from $500,000 to $100,000. It said a punitive damages award of the scale imposed by the trial judge could only be justified in extraordinary circumstances of a similar nature to those in Hill and Whiten. The court found the most useful comparator was the case of Whiten, given that it, too, was a contracts case.
In Whiten, the Supreme Court of Canada made clear that any punitive damages award must be proportionate to the blameworthiness of the defendant’s conduct. However, in arriving at that conclusion, the Court of Appeal in Keays found the Supreme Court of Canada had really focused on the duration of the misconduct in order to make its assessment: “The more reprehensible the conduct, the higher the rational limits to the potential award. The need for denunciation is aggravated where, as in this case, the conduct has persisted in over a lengthy period of time (two years to trial) without any rational justification, and despite the defendant’s awareness of the hardship it knew it was inflicting.”
In comparing Whiten to Keays, the court found the two factors which stood out were that:
•in Keays there was no two-year period of escalating misconduct up to the trial, given that it was only seven months and was focused largely on events prior to the termination; and
•in Whiten the defendant persisted in its course of conduct based on a theory that the plaintiff deliberately set the fire, despite the repeated findings from its own experts and advisors that the fire was accidental. In fact, the Supreme Court of Canada described the defendant’s attitude as being “harsh and unreasoning opposition” with an attempt to “exploit a family in crisis.” The Ontario Court of Appeal however, found that this was not the case in Keays.
The Ontario Court of Appeal found Honda’s intent to intimidate and terminate Keays, thereby depriving him of his right to be accommodated, was an act worthy of punitive damages, as was Honda’s awareness of its obligation to accommodate him, and not act in reprisal, as it did upon the termination.
Also the court made it clear that Keays’ dependence upon his employment for his benefits, and his particular vulnerability, were also factors worthy of support for punitive damages. In essence, the Ontario Court of Appeal sent a strong message to employers that they cannot avoid their duty to accommodate an employee’s disability and, if they do, there will be consequences.
Natalie MacDonald is a partner with Grosman, Grosman and Gale, a Toronto-based law firm specializing in employment law. She can be reached at (416) 364-9599 or [email protected].
