Appeal court chops record award

The Ontario Court of Appeal has drastically reduced a March 2005 Superior Court penalty against Honda Canada, awarded to an employee who was let go and subjected to treatment that the decision says constituted discrimination and harassment.

While the Court of Appeal held that Honda's appeal in Keays v. Honda Canada Inc. should be dismissed, the court majority ruled that the penalty awarded by the Superior Court should be reduced to $100,000 from its original amount of $500,000.

The previous award was the largest punitive damages award in an employment case in Canadian history. Honda was appealing the findings of the previous trial, and also alleged bias on the part of the trial judge.

The plaintiff, Kevin Keays, had been an employee of Honda since 1986, but went on long-term disability from October 1996 to December 1998 and was diagnosed with chronic fatigue syndrome (CFS).

After his benefits were terminated in 1998, Keays returned to work but continued to miss days of work because of his CFS and was required to obtain medical notes for each absence.

According to the judgment, Keays requested that his employer remove the "coaching" from his record and revisit the requirement for a medical note, but he continued to be "stonewalled [as the trial judge found] in connection with this requirement, the appellant's acknowledgement of the validity of his disability, and his need for reasonable accommodation."

After his counsel sent a letter to Honda in March 2000 outlining concerns and offering to work towards a resolution, Keays was asked to meet with an occupational medical specialist. He was terminated in March 2000 for insubordination after declining to meet with the doctor.

In addition to the punitive damages award and compensatory damages in lieu of 24 months' notice, Superior Court Justice John McIsaac handed down a $610,000 costs award earlier this year in the case.

Appeal Court Justice Stephen Goudge agreed with the trial judge's findings that "the appellant deliberately contrived in bad faith to intimidate and then wrongfully terminate him to avoid its duty to accommodate a disability whose legitimacy it could not accept."

The court also agreed with the previous decision to award punitive damages in the case, as Goudge notes: "given his findings of fact, I find no reviewable error in these conclusions. They provide a rational basis for an award of punitive damages, as deterrence and denunciation of conduct causing significant harm to those who are disadvantaged and vulnerable due to disability."

However, in deciding to reduce the amount of the award, the Court of Appeal concluded there was no evidence Honda had been involved in any broad-based conspiracy and no evidence that the company had anything to do with the insurer's decision to terminate Keays' benefits. The court also noted there was no "outrageous conduct" after March 2000.

"Punitive damage awards in other wrongful dismissal cases have been far more modest even in the face of serious misconduct such as slander of the employee. The awards in such cases have been in the range of $15,000 to $50,000 and, rarely, up to $75,000.

In my view, a punitive damage award on the scale imposed in this case can be justified only by extraordinary circumstances of a similar nature to those in Whiten and Hill," wrote Justice Marc Rosenberg for the majority (including Justice Kathryn Feldman) on the issue of punitive damages.

"Despite the gravity of some of the findings of misconduct the trial judge made against the appellant, the appellant's conduct cannot fairly be described as malicious," wrote Rosenberg.

"Given the compensatory damages awarded, especially the Wallace damages, and that there were no special factors requiring deterrence such as a pattern of abuse or the kind of conduct found in Whiten, as well as the relatively short duration of the misconduct, in my view, an award of no more than $100,000 can be justified," he adds.

Hugh Scher, counsel for Keays, says the total judgment, when taking into account the costs award, is still around $900,000.

"It's still a very significant award for an employment law case. It's probably still the largest or one of the largest," he says.

Scott Maidment, a partner with McMillan Binch Mendelsohn, who represented Honda in the case, told Law Times that Honda is considering seeking leave to appeal to the Supreme Court.

"Honda has to consider what the impact of this decision is going to be on how it conducts business and part of that consideration will determine whether it seeks leave to appeal," he adds.

Scher says the court made a strong statement about the employer's duty to accommodate and how it goes about that accommodation.

"The only issue the majority took was the quantum of the punitive damages.
"The amount of the award is less significant from a legal perspective than the principles which underlie the award, because the amount of the award is something that is determined on a case-by-case basis. It is to a certain extent subjective. That may be something that if this goes up to the Supreme Court, the Supreme Court may want to address in perhaps greater detail than it already has," he adds.

"It sets a precedent that puts employers on notice that they have to act appropriately, in good faith, honestly and reasonably toward employees and if they fail to do so, they can be hit with significant sanctions, including significant punitive damage awards depending on the circumstances of the case," says Scher.

Michael Fitzgibbon, an employment lawyer with Borden Ladner Gervais LLP in Toronto, comments that there was a concern when the trial judgment came out that it would "open the floodgates" on punitive damages awards.

However, he adds, the Court of Appeal, as the Supreme Court has done in other cases, emphasized that punitive damages are an exceptional award and only to be awarded in exceptional cases.

"I suspect that there will probably be greater pleading of punitive damages in wrongful dismissal cases. Will it increase courts awarding punitive damages? I don't think so," says Fitzgibbon.

"There's a recognition in the majority decision that a punitive damages award on the scale that the trial judge gave in this case would only be justified in the most extraordinary of circumstances, so have we seen the cap? It's hard to say," he adds.

"This shouldn't be seen as the norm. This is very much the exception."
According to Maidment, however, since the first decision in this case came out, many employment lawyers have seen an increase in claims for punitive damages.

"What it means is that now it is open to a plaintiff in a wrongful dismissal suit to claim punitive damages for breach of human rights and I think unfortunately now we are going to see a lot more of those types of allegations in lawsuits.

"I think that one of the effects of this decision is that the courts are going to get more human rights business," adds Maidment.

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