Scrapped damages in Keays Good News for Employers

Written by on July 16, 2008 in Published Articles

PDF Version (Originally published in Canadian Employment Law Today, July 16, 2008)

The Supreme Court of Canada’s decision in Keays v. Honda Canada Inc. was far from what many had expected, but it provides both employers and employees with an important clarification on the limits and expectations associated with an employer’s duty to accommodate a disabled employee. This duty requires the employer to conduct a thorough investigation of an employee’s disability. The employee may see this as an intrusion and refuse to abide by the employer’s requests, as was seen in the communication between Honda and Kevin Keays.

The decision provided the clarification that was long needed with respect to an employer’s duty to accommodate a disabled employee and an explanation with respect to when damages will be awarded for the conduct of dismissal as well as punitive damages.

“The real gist of what (Justice Rosenberg of the Ontario Court of Appeal) retained of the allegations against Honda was Honda was a lean organization, they were tired of carrying this guy, they understood an obligation to accommodate, they were tired of doing that and this is the inference he took from the overall pattern of facts. So, one can, as you’re doing, attack each individual fact, but (Rosenberg) says when you take them all together what was being done here was an attempt to deprive (Keays) of his accommodation,” Justice William Binnie said to Honda’s counsel.

Taking such comments as Justice Binnie’s into account, it seemed apparent Honda’s conduct was being scrutinized in order to determine whether it was simply bad, or conduct which should be labeled as bad faith and worthy of damages.

No Bad-Faith Conduct by Honda

The Supreme Court found there was no evidence indicating Honda’s conduct towards the accommodation of Keays was in bad faith or deserving of punitive damages. Instead, the only award upheld from the decisions of both the trial judge and the Court of Appeal was that of 15 months’ pay in lieu of notice.

In reaching this decision, the Supreme Court held that the four points on which the trial judge had based his findings of bad faith were without evidentiary support. Three of these four points are related to Honda’s accommodation of Keays.

Firstly, there was no evidence indicating a March 28, 2000, letter from Honda to Keays was a deliberate misrepresentation of the views of both Dr. Affoo, who was one of Keays’ doctors, and Dr. Brennan, the doctor used by Honda, on Keays’ disability.

“Dr. Affoo concluded that Keays was able to work and should try to work as much as possible,” the court said, while “Dr. Brennan communicated to Honda that he was unable to diagnose Keays with chronic fatigue syndrome (CFS) without meeting with him first.” Honda, according to the court, was simply relaying the medical information it received from the doctors to Keays and did not act in bad faith by doing so.

Secondly, the court did not see any evidence Dr. Brennan was taking a “hardball” approach towards Keays and his condition. Instead, Brennan was simply stating his medical opinion that he “could not, with the information that was provided to him, accept a diagnosis of CFS without first meeting Keays.”

Even if Brennan had been playing “hardball,” the court could not fault Honda for accepting Brennan’s advice and opinion without evidence of a conspiracy to terminate Keays.

Thirdly, the court found Honda did not act in reprisal when it halted Keays’ accommodation program. Rather, the accommodation process had been stopped in order to allow Brennan to confirm Keays’ disability, though he was unable to since Keays refused the request to meet with Brennan.

These three points clarify what is appropriate conduct when accommodating an employee’s disability. By finding the actions of Honda in each of these situations did not warrant bad-faith damages, the court determined what actions by an employer are permissible in relation to its duty to accommodate.

Bad-Faith Damages for Employee Loss Stem from Employer Conduct

The duty to accommodate has been further clarified by the court’s decision. The court found Honda didn’t do anything that warranted an award of punitive damages. Referring to its 2002 decision in Whiten v. Pilot Insurance Co., it said courts should only resort to punitive damages in “exceptional cases.” It also cited the 1989 decision in Vorvis v. Insurance Corp. of British Columbia, which indicated actions worthy of punitive damages must be “harsh, vindictive, reprehensible and malicious.”

The court found Honda committed no such acts in dealing with Keays and his condition. The requirement of a doctor’s note for every absence was not discriminatory, but was simply differential treatment in order to accommodate Keays by establishing “an expected rate of absences which would not give rise to disciplinary action.”

Furthermore, the court said that when awarding punitive damages, the focus must be on the employer’s misconduct and not the employee’s loss. Therefore, the court commented that even if the award for damages for the conduct of dismissal had been upheld, the punitive damages could not be awarded because Keays would have been compensated for the same loss twice.

“Damages attributable to conduct in the manner of dismissal are always to be awarded under the Hadley principle (to compensate for a loss directly resulting from the employer’s breach of the employment contract) and no extension of the notice period is to be used to determine the proper amount to be paid,” the court said. “The amount is to be fixed according to the same principles and in the same way as in all other cases dealing with moral damages.”

Accordingly, bad-faith damages should be based on the employee’s actual loss, similar to tort damages.

Employers Can Request Information Before Accommodating a Disability

In rendering this decision, the Supreme Court of Canada has established what is acceptable conduct when accommodating an employee, and therefore not worthy of bad-faith nor punitive damages in dismissal. Now, an employer will not be overreaching, but rather reasonable, when making requests for information to clarify an employee’s disability before modifying the workplace or work schedule and ensure the employee is not punished for conduct related to her disability, such as absences from work. Furthermore, an employer is permitted to terminate an employee with notice if such reasonable requests related to accommodation are not fulfilled by the employee.

If an employer’s requests related to accommodation are not reasonable, the employer could be found to have constructively dismissed the employee and be ordered to pay the employee in lieu of notice. An award of damages may additionally be made based on the conduct of dismissal, taking into account the employee’s loss. An award of punitive damages could be made based on the employer’s misconduct, provided, of course, the Whiten and Vorvis tests are met and there is no doubling up of compensation to the employee.

The clarification on the duty to accommodate provided in this decision by the Supreme Court of Canada has the potential to add further stability to employment relationships in the future. It simultaneously provides the possibility for an employee to receive proper accommodation for a disability through information requested by the employer, while supplying the employer with information to make the workplace more accessible for the employee and minimizing the likelihood of an employer engaging in the sort of behaviour that would attract damages for bad-faith conduct and punitive damages.

The Whiten and Vorvis Tests

Punitive damages are usually not awarded on top of wrongful dismissal damages because the intention of the latter is to compensate for loss from the dismissal itself. The employer’s conduct must constitute a separate loss than from the breach of contractual duties to warrant punitive damages.

In Vorvis v. Insurance Corp. of British Columbia, a fired employee was denied punitive damages for bad conduct by a supervisor because it happened before the dismissal and didn’t aggravate the damage caused by the dismissal itself. However, the court did say aggravated damages could be awarded if the conduct resulted in a separate “actionable wrong.” The Supreme Court of Canada found Keays was in a similar situation in that Honda’s actions didn’t affect his loss from the wrongful dismissal.

In Whiten v. Pilot Insurance Co., Pilot Insurance accused a family of deliberately burning down their house, though there wasn’t any real evidence of this. Pilot was found to have acted maliciously towards the family, taking advantage of their vulnerability and punitive damages were awarded. The Supreme Court of Canada cited this case as an example of the type of conduct where punitive damages should be awarded, and Honda’s conduct towards Keays did not meet this standard of “malicious, high-handed” behaviour.

For more information see:

Keays v. Honda Canada Inc., 2008 CarswellOnt
3743 (S.C.C.).

Whiten v. Pilot Insurance Co., 2002 CarswellOnt
537 (S.C.C.).

Vorvis v. Insurance Corp. of British Columbia, 1989 CarswellBC 76 (S.C.C.).

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