Keays vs. Honda
Can courts award punitive damages based on discrimination?
This is the question upon which the Supreme Court of Canada has been deliberating since February 20, 2008 when Honda appealed the 2006 Court of Appeal for Ontario's upholding of a 2005 decision of the Ontario Superior Court of Justice.
In March 2005, the Ontario Superior Court of Justice awarded employee Kevin Keays compensatory damages (24 months pay in lieu of notice) and punitive damages ($500 000) after finding that Honda had wrongfully terminated him after a period of harassment because of his disability (Chronic Fatigue Syndrome).
On September 29, 2006 the Court of Appeal for Ontario upheld that decision but reduced the punitive damages to $100 000 after finding that the trial judge had erroneously distorted the duration, and misidentified nature, of Honda's misconduct.
On February 20, 2008 the Supreme Court of Canada heard Honda's appeal of the Court of Appeal's ruling.
Employers and employees across Canada eagerly await what might be a Canadian Supreme Court landmark decision in employment law allowing employees the right to sue their employers for discrimination leading to wrongful termination.
- Honda terminated Keays because he disobeyed a direct order to meet with the occupational specialist. Was this order reasonable?
- Did the employer have reasonable cause not to comply with the employer's order?
- Was the discipline proportionate to insubordination?
- Did the Trial Judge correctly calculate reasonable notice?
- Did the Trial Judge err in its ruling of bad faith conduct?
- Did the Trial Judge err in finding that Keays was entitled to punitive damages for discrimination?
- Did the Trial Judge err in concluding that Honda's conduct was sufficiently reprehensible to warrant punishment?
- Did the Trial Judge err in assessing the quantum of damages?
- The trial judge ruled, and the court of appeal agreed, that this order was unreasonable order for three reasons: a) only medical documentation would allow the specialist to understand the employee's condition; In the same meeting/memo ordering Keays to meet with Dr. Brennan, the employer informed the employee that the specialist had already concluded that Keays did not have a disability requiring him to be absent from work; c) and that based on this information, Honda had already revoked Keays' accommodation.
- The trial judge ruled, and the court of appeal agreed, that the employee had reasonable cause not to comply with this order because the order itself was unreasonable.
- The trial judge ruled, and the court of appeal agreed, that termination is the ultimate form of employment discipline, one that is required by only the most egregious acts such as 1) misconduct that gives rise to a breakdown in the employment relationship 2) misconduct that is fundamentally or directly inconsistent with the employee's obligations 3) misconduct that violates an essential condition of the employment contract. Refusing, with reasonable cause, to comply with an unreasonable order does not constitute such an egregious act.
- The Court of Appeal for Ontario ruled that the Trial Judge had correctly used what is known as the Bardal factors (including length of service/degree of leadership) to calculate 15 months of reasonable notice for the complainant and the Wallace factors (including bad faith misconduct) to extend this to 24 months of salary in lieu of notice.
- The trial judge ruled and the court of Appeal for Ontario agreed that Honda conducted itself in bad faith when it: 1) It misrepresented, in the March 28 letter, the views of the company doctor and its occupational medicine specialist in order to justify terminating the accommodation. Contrary to what the letter stated, neither had come to the conclusion that Keays was malingering or that there was no disability requiring accommodation. 2) It set the employee up for failure in requiring him to meet with a company specialist who would have required him to attend work regularly, an physical impossibility according to his physician; and 3) It terminated Keays' accommodation in retaliation for his having retained counsel to protect his human right (This constitutes discrimination in the form of illegal reprisal).
- The Trial Judge ruled, and the Court of Appeal for Ontario agreed, that although a complainant does not have the right to sue an employer for discrimination or harassment, he is entitled to punitive damages if the employer engages in discriminatory or harassing conduct that leads to wrongful termination. The following chain of events demonstrates how Honda did just that: 1) "The appellant required the respondent to justify his medical absences because of his particular disability when employees with "mainstream" illnesses were not so required2) Due to absences caused by his disability, the appellant subjected him to the first step in the discipline process and then refused to remove the disciplinary "coaching" from his record3) It required him to attend an interview with the company doctor where his disability was belittled and, as the trial judge found, he was treated with gross insensitivity.4) What limited accommodation the company gave the respondent was cancelled in retaliation for his having retained a layer to advance the rights guaranteed to him by the Human Rights Code.5) And the trial judge found that when the respondent refused to be "bullied" into seeing Dr. Brennan without an assurance that he would not be abused again, he was fired."(52)
- The trial judge listed the following acts/aspects as reprehensible:1) "that the appellant's motivation for terminating the respondent was to avoid its obligation to accommodate his disability;2) that it attempted to intimidate him into seeing its occupational medicine specialist who employed a hardball approach to employee absenc3) and that the appellant did all of this in full knowledge of the respondent's particular vulnerability because of his disability" (para 56). The Court of Appeal for Ontario agreed that these acts were reprehensible especially in the context of an employer denying reasonable accommodation to a vulnerable employee with a disability: "That is what the trial judge found happened here. In essence, he found that the appellant refused to give genuine recognition to the respondent's disability and seek, in an open minded, unbiased and good faith way, to meet with him to find a reasonable accommodation. Rather, 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. 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" (58)
- The majority of the Court of Appeal ruled that the trial judge over-calculated the quantum of the punitive damages. They reached this conclusion by comparing Honda's misconduct in the Keays case to Pilot Insurance's misconduct in a precedent case (Whiten v. Pilot Insurance Co.,  1 S.C.R. 595, 2002 SCC 18) in which an insurance company accused a homeowner of burning down his own house. The two main differences in those cases were:1) Whereas the misconduct in the Whiten case had lasted two years, that in the Keays case only lasted 7 months. 2) Whereas Pilot Insurance continued to harass its client, in the face of repeated findings that the fire was accidental; Honda had "advice, albeit wrong and based on incomplete information, that caused it to question the respondent's disability and it had, for almost a year, accommodated his absences" (114) . However, although Honda's misconduct was shorter and less abusive than Pilot's misconduct, it was more reprehensible than misconduct in typical wrongful dismissal cases because:1) it was planned and deliberate 2) it targeted an employee who was particularly vulnerable 3) the employer knew it had a duty to accommodate the employee. Given the compensatory damages awarded for essentially the same misconduct, and given the lack of evidence of any pattern of abuse within Honda, the majority decided to reduce the punitive damages from $500 000 to $100, 000 In the Whiten Case, Binnie J listed seven factors to consider in fixing the quantum of a punitive award:
1) Duration of the Misconduct
2) Whether or not the misconduct was planned and deliberate
3) The Vulnerability of the Employee
4) Whether or not the misconduct was malicious and high-handed
5) The need for deterrence
6) the totality of other penalties including compensatory damages imposed on the defendant
7) the punitive damage award must be proportional to the advantage wrongfully gained