Significant Human Rights Decision Upheld at Court of Appeal: Keays v. Honda

By Kate Hughes

In a decision long-awaited by those interested in disability and human rights issues, the Ontario Court of Appeal recently upheld the controversial Keays v. Honda decision in which a disabled employee was awarded unusually high damages, including punitive damages. The trial Judge had found that the employer had terminated the employee without just cause and in bad faith, and awarded significant wrongful dismissal damages of 15 months’ pay in lieu of notice, nine months’ damages for bad faith conduct (referred to as “Wallace damages”) and $500 000 in punitive damages (as well as more than $600 000 in legal fees). The Court of Appeal upheld the decision, although the majority award reduced the quantum of punitive damages from $500 000 to $100 000.

This case is likely to have an impact beyond the non-unionized workforce and is expected to be relied upon by unions and others in arbitrations and before human rights tribunals in cases where employers, their agents or insurers, handle disability, accommodation and other related matters in bad faith.

Facts in Keays v. Honda

Honda Canada terminated Kevin Keays, a disabled employee with 14 years’ service who suffered from Chronic Fatigue Syndrome. Mr. Keays’ disability affected his attendance at work and resulted in the employer giving him poor performance assessments despite the fact that he was otherwise a “dedicated and conscientious employee”. Mr. Keays received Long Term Disability (LTD) benefits from 1996 to 1998; at that point, the employer’s insurer deemed Mr. Keays able to return to work and terminated his LTD benefits. Mr. Keays returned to work under protest and soon began to experience a renewal of symptoms that required him to be intermittently absent from work. Mr. Keays’ physician confirmed that he suffered from ongoing Chronic Fatigue Syndrome and his condition would likely require him to continue to be absent from work for medical reasons.

The employer provided some accommodation but put “coaching“ on his record and required Mr. Keays to obtain a doctor’s note for each absence, a requirement not imposed on other employees. In addition, the employer required Mr. Keays to see the company’s doctor. The latter threatened to force Mr. Keays to return to a position on the physically demanding production line. When Mr. Keays asked that the employer’s “coaching” be removed from his file and that he no longer be required to provide medical notes to support each absence, he was, in the words of the trial Judge, “stonewalled”.

As a result, Mr. Keays retained legal counsel who contacted the employer and offered to work towards a resolution of the situation. The employer responded by taking the position that Mr. Keays was no longer disabled and ordered Mr. Keays to once again see the company physician. On the advice of his lawyer, Mr. Keays declined to do so unless he received clarification as to the purpose of the meeting. The employer refused clarify the purpose of the meeting and instead fired Mr. Keays. As a result of his termination, Mr. Keays suffered from post-traumatic adjustment disorder and qualified for a total disability pension under the Canada Pension Plan.

Ontario Court of Appeal Decision

The Court of Appeal upheld the trial Judge’s decision that the employer’s actions amounted to wrongful dismissal and bad faith conduct. The Court concluded that Honda’s actions were “planned and deliberate and designed to intimidate and ultimately terminate the employment of a particularly vulnerable employee”. It found that it was unreasonable for Honda to order Mr. Keays to see its occupational medicine specialist without clarifying the purpose of the meeting. Moreover, the Court found that Honda’s refusal to provide clarification “would seem more consistent with the exercise of authority for its own sake than with an attempt to make the accommodation process function in a way that respected [Keays’] dignity and equality.”

The Court of Appeal concluded that wrongful dismissal damages for lack of notice, “Wallace damages” and punitive damages were all justified, although the Court reduced the $500 000 quantum of punitive damages awarded at trial to $100 000. The Court stated that the punitive damages were justified on the basis that Honda’s conduct was planned and designed to intimidate Mr. Keays who it knew to be particularly vulnerable due to his medical condition. The Court stressed employers’ duty to accommodate disabled employees and noted that an employer “must engage in this process reasonably and in good faith.” According to the Court, “where [an employer] proceeds in bad faith and seeks to evade its legal obligation to accommodate those rendered vulnerable through disability by wrongfully terminating them, compensation and punishment are both justified.”

The majority of the three member Court reduced the award of punitive damages, among other reasons, because it disagreed with the trial Judge’s finding that Honda’s ”outrageous conduction persisted over a period of five years” and determined instead that the misconduct occurred only over a seven month period. As well, the Court of Appeal noted that Honda’s conduct was not as egregious as the persistent conduct of the insurer in Whiten v. Pilot Insurance, a 2002 case in which the Supreme Court of Canada awarded one million dollars in punitive damages. Noting that punitive damage awards have been rare and generally much lower in Canada than in some other jurisdictions, the Court of Appeal substituted a quantum of $100 000 in damages.

Likely Impact of Keays v. Honda Decision

It remains to be what impact the Keays v. Honda decision will have on arbitral, human rights and wrongful dismissal cases. However, the decision raises many important issues to be considered by those representing employees.

(a) Challenging an Employer’s Bad Faith Conduct in the Treatment and Accommodation of Disabled Employees

Although the Keays v. Honda case involved the wrongful dismissal of a non-unionized employee, it also dealt with an employer’s duty to accommodate and other human rights issues that are frequently addressed by arbitrators and other administrative tribunals including human rights tribunals. Many unions frequently allege high-handed or bad faith conduct on the part of employers, and their agents, with respect to accommodation issues, demands for medical reports, forced visits to in-house physicians and others contracted by the employer to “manage” sick leaves and the accommodation of disabled employees. The Keays v. Honda decision may provide a very useful precedent in arbitration and tribunal cases involving these issues, as the Court of Appeal made clear that bad faith conduct towards vulnerable employees is unacceptable.

(b) Punitive Damages

Punitive damages are rarely awarded in civil cases, even more seldom awarded in arbitration cases, and almost never awarded in human rights tribunal cases. However, some arbitrators have awarded punitive damages and “tort-like damages” to remedy employers’ high-handed conduct in some types of cases (see for example, Pacific Press and C.E.P., Loc. 115-M (Velestuk) (Re) (1998), 73 L.A.C. (4th) 35.)

In O.P.S.E.U. v. Seneca College, a decision released in May of this year, the Ontario Court of Appeal upheld as "not patently unreasonable" an Arbitration Board's finding that the O.P.S.E.U. collective agreement in question did not provide it with the power to award aggravated and punitive damages for tort-like conduct. Leave to appeal to the Supreme Court of Canada was dismissed on November 16, 2006. In its decision, the Court of Appeal concluded that the Arbitration Board gave cogent reasons for its finding that it did not have the power to award punitive or aggravated damages in that case. However, the Court of Appeal's decision in Keays v. Honda arguably lays some of the groundwork for a more restrictive application of its decision in O.P.S.E.U. v. Seneca College. In our view, the issue of punitive and tort-like damages in arbitrations is still a live issue, depending on the circumstances in particular cases.

Conclusion

In our view, unions and employees will want to consider requesting extraordinary damages in cases where employers and/or their agents act in bad faith or engage in high-handed misconduct in dealing with disabled employees, accommodation issues, sick benefits and terminations. In the right fact situation, the Court of Appeal’s reasoning in Keays v. Honda and its significant damage award may be used in support of expanded damage awards at arbitration and before human rights tribunals.