No bad-faith or punitive damages for Keays

Honda only on the hook for pay in lieu of notice after lower courts’ awards are struck down by SCC

The Supreme Court of Canada has struck down bad-faith and punitive damages against Honda Canada in a landmark wrongful dismissal case dealing with employee absences related to a disability.

The Ontario Superior Court of Justice and the Ontario Court of Appeal both found Honda discriminated against employee Kevin Keays and acted in bad faith by refusing to accept doctor’s notes that said his frequent absences were due to chronic fatigue syndrome (CFS). It demanded notes for every CFS-related absence and asked him to attend its own medical assessment. When Keays declined to meet with the company doctor and retained a lawyer, Honda fired him.

The Supreme Court of Canada, in a decision released in June, agreed Keays was wrongfully dismissed and upheld the 15 months’ pay in lieu of notice awarded by the trial court. However, in a 7-2 decision, the court struck down the extra nine months’ bad-faith damages and $100,000 in punitive damages, because it said Honda did not act in bad faith and was within its rights to rely on the opinion of its own medical experts. In stripping the bad-faith, or Wallace, damages, the Supreme Court said this type of damages should only be applied if the employer’s conduct directly caused damages resulting in a loss to the employee. The court also said punitive damages were only justified in situations where the employer’s actions were particularly outrageous and malicious.

The Supreme Court’s decision is good news for employers, said Stuart Rudner, an employment lawyer with Miller Thomson in Toronto. Not only can employers feel more comfortable in using attendance management programs where a disability is involved, but it appears they will be able to get a better idea of when bad-faith damages will be awarded and how much they might be.

“Previously, Wallace damages were arbitrary, but now they will be more compensatory,” said Rudner. “Employees will have to prove a loss to get the extra damages. It’s a more rational approach.”

The Human Resources Professionals Association (HRPA) of Ontario, which had intervened in the case on behalf of its members due to concern over the right of employers to use doctor’s notes to manage attendance, was very pleased with the decision, said Stephen Rotstein, general counsel of the HRPA.

“Absenteeism is a huge problem to the Canadian economy and the Supreme Court has confirmed to employers they can use doctor’s notes as a way to manage their attendance,” said Rotstein. “Employers can now be more confident in dealing with absenteeism in employees.”

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