Courts adopting ‘moderate’ approach to HR

Final act of Keays v. Honda Canada saga swings in favour of employers
By Stuart Rudner
|Canadian Employment Law Today|Last Updated: 10/17/2011

A welcome decision for employers

The Supreme Court of Canada’s recent decision in the

Keays v. Honda

case was much anticipated by employers, as much was riding on it. After lower court decisions left the status of attendance management programs in limbo, employers were unsure of how to handle absenteeism, particularly where a disability is involved.

The Supreme Court not only clarified this issue for employers, it clarified something else as well: How bad-faith, or Wallace damages, should be determined. The addressing of both issues in the decision gives employers more certainty when addressing the issues of accommodation, absenteeism and bad faith in dismissal.

Stuart Rudner, who represented the Human Resources Professionals Association in its application to the court for intervenor status on the issue of requiring doctor’s notes, offers his take on what the decision means for employers.

Employers across the country can feel reassured after the Supreme Court of Canada handed down its landmark decision in

Keays v. Honda Canada

. The verdict is actually the continuation of a trend over the last few years which has seen the courts adopt a more moderate approach to human resources issues. This has been evident in cases where just cause is alleged, and also in a number of recent appellate court decisions.

So what does

Keays

mean for employers? Generally speaking, it should reduce or eliminate the fear that reasonable efforts to address disability-related attendance issues will result in a punishing judgment against them. It should also provide greater certainty with respect to the types of damages that can be awarded in wrongful dismissal claims. In particular, the Supreme Court in

Keays

:

•recognized employers’ need to control absenteeism and their responsibility for managing their own workforce;

•confirmed the threshold for punitive damages is high and only exceptional cases will justify such an award;

•discourages duplication of damages based upon the same set of facts;

•rejects breaches of human rights legislation as independent actionable wrongs; and

•replaces the arbitrary “

Wallace

bump-up” for bad faith in the course of dismissal with a compensatory approach based upon actual damages suffered.

Kevin Keays was a 14-year employee at the Honda plant in Alliston, Ont. He suffered from chronic fatigue syndrome (CFS), which caused him to miss work frequently. Despite glowing work assessments, he continually received poor reviews for his attendance.

After exceeding the allowed number of absences, Keays was enrolled in Honda’s disability program, which was designed to exempt disability-related absences from discipline. However, Keays was absent more often than anticipated and Honda appeared to become more skeptical of his absences. This likely exacerbated Keays’ condition, leading to even more absences.

Honda retained the services of an occupational medicine specialist and directed Keays to meet with him. Keays’ lawyer said Keays would meet with the specialist if the “purpose, methodology and parameters of the assessment” were provided, but Honda declined to provide further information. Keays refused to attend and was dismissed for cause. He sued for wrongful dismissal and sought damages arising out of the dismissal, discrimination and harassment.

Record damages

The trial judgment was a record-setting combination of damages for wrongful dismissal, punitive damages and costs. Justice McIsaac of the Ontario Superior Court of Justice rejected the allegation of just cause and was extremely critical of Honda, even suggesting a protracted corporate conspiracy. McIsaac found there was “egregious bad faith” in the manner of dismissal and found Honda’s conduct constituted discrimination justifying an award of punitive damages.

The trial court awarded Keays:

•15 months’ pay in lieu of notice;

•a nine-month extension of the notice period due to bad faith in the course of dismissal (

Wallace

damages); and

•$500,000 in punitive damages.

This decision sent shockwaves through the business and legal communities. The amount of punitive damages, in particular, dwarfed any previous award in an employment law case. The findings regarding discrimination also created a chilling effect which dissuaded many employers from addressing legitimate attendance issues any time a disability was involved.

The Ontario Court of Appeal upheld the 15 months’ pay in lieu of notice and the nine-month “

Wallace bump

” but the majority reduced the punitive damages to $100,000 on the basis that some of the facts relied upon by the trial judge (including the corporate conspiracy and five years of outrageous conduct) could not be supported in the evidence.

In front of the Supreme Court of Canada, Honda abandoned the allegation of just cause. With respect to the notice period, the Supreme Court agreed 15 months’ notice was appropriate. However, in a surprising development, it went on to overturn every other aspect of the lower courts’ decisions.

‘The damages formerly known as Wallace’

The Supreme Court found “the trial judge made a number of significant overriding and palpable errors” and Honda’s conduct in dismissing Keays did not demonstrate “egregious bad faith.”

What is most notable, however, is the court went on to completely revamp the way in which damages for bad faith are assessed. In the 1997 Wallace decision, the Supreme Court made it clear employers must act fairly and in good faith in the course of dismissal. The court held that a breach of this duty would be compensated by way of an extension of the notice period. This approach met with criticism, it was considered arbitrary and unfair to lower-income employees.

In

Keays

, the Supreme Court held that “in cases where damages are awarded, no extension of the notice period is to be used to determine the proper amount to be paid.” Rather, damages will be compensatory and based upon actual damages suffered by the employee. While there is potential for larger awards than under the old extension of notice period approach, the reality is this is likely to result in fewer awards.

Recognizing the significance of the change, the minority decision referred to these damages as “formerly”

Wallace

damages.

Punitive damages and double-compensation

Although the Court of Appeal reduced the punitive damages by 80 per cent, the Supreme Court found that even $100,000 was unwarranted. Specifically, it re-asserted the threshold for punitive damages.

“Punitive damages are restricted to advertent wrongful acts that are so malicious and outrageous that they are deserving of punishment on their own,” the Supreme Court said. It went on to find in this case, Honda did not demonstrate such conduct. Further, the court held a breach of human rights legislation is not an independent actionable wrong that can support an award of punitive damages.

One of the criticisms of the lower court decisions in Keays was that they awarded multiple forms of damages arising out of the same set of facts. The Supreme Court explicitly recognized this concern and noted that courts should “avoid the pitfall of double-compensation or double-punishment.” Essentially, if the award of actual damages will compensate the victim, penalize the wrongdoer and deter future misconduct, then no punitive damages should be awarded in the absence of sufficiently egregious behaviour.

The doctors’ notes requirement

The trial judge’s conclusion that Honda discriminated against Keays was based largely on its requirement for Keays to provide doctors’ notes to identify which absences were disability-related, so that those absences could be accommodated. With minimal analysis, he found asking for the notes was, in itself, a failure to accommodate.

The Human Resources Professionals Association of Ontario (HRPA) intervened before the Supreme Court of Canada to address this issue. The HRPA argued employers need to be able to identify which absences are disability-related in order to accommodate them, and in most cases a doctor’s note will be an appropriate manner of doing so.

The Supreme Court accepted the need to monitor the absences of employees is a

bona fide

work requirement in light of the very nature of the employment contract and responsibility of the employer to manage its workforce. It agreed the doctors’ note requirement was part of the accommodation process, allowing disabled employees to avoid discipline for disability-related absences.

As a result, employers should be more confident in taking reasonable, proactive steps to address disability-related absenteeism. That said, this decision does not provide employers with

carte blanche

in dealing with attendance issues. the tools used must be reasonable and not discriminatory.

Stuart Rudner is a partner in Miller Thomson LLP’s Labour and Employment Group in Toronto. He can be reached at (416) 595-8672 or srudner@millerthomson.com.

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