Honda Canada v. Keays: Wrongful Dismissal Law

The Supreme Court of Canada released the long-awaited decision in Honda v. Keays last week.  Keays had a disability that caused him to be frequently absent from work.  The employer required him to submit medical letters for each absence, and then insisted that the employee be examined by a doctor chosen by the employer.  The employee retained a lawyer, who asked the employer to clarify the reason for the request to see the new doctor, and when the employer refused to respond to that request, the employee refused to see the employer-selected doctor.  The employer then fired the employee.
The trial judge ordered 15 months’ reasonable notice damages, and then ‘extended’ those damages by 9 months for bad faith in the manner of dismissal (the Wallace damages).  In addition, he ordered $500K in ‘punitive damages’, finding that the employer’s breach of the Human Rights Code by the employer constituted a ‘separate actionable wrong’ required for a punitive damages award (see Vorvis).  The Court of Appeal upheld the decision, except it lowered the punitive damages award to $100K.  The Supreme Court upheld the 15 month’s notice period, but overturned the “Wallace” damages and the punitive damage award.
It is not surprising that the Court sided with the employer:  the Supreme Court has a long history of conservative awards in wrongful dismissal cases.  There is so much to comment on in this case, that I could do 12 blog entries.  But I’ll resist, although this entry is longer than most. Instead, I’ll restrain myself to two rants, and 2 comments on legal points:
Rant 1:  This case is a classic example of how appellant courts use language like ‘palpable and overriding factual error’ as a guise for simply finding that they would have decided the case differently than the trial judge.  In other words, if the SCC thinks a different outcome is warranted, it will give no deference to the fact that the trial judge is best situated to make factual findings.  This case was factually dense, involved an extended trial involving reams of testimony, and the trial judge heard every word of it and was able to assess the witnesses personally.  The Court of Appeal ruled that the trial judge’s factual findings should therefore be given substantial deference.  The majority of the Supreme Court, on the other hand, gave virtually no deference to the trial judge, painting him as radical nutter out to get Honda.  This difference in approach to deference explains the different outcomes in the SCC and the Ont. C.A.  
Here’s one of the dubious examples of how the SCC attacks the trial judge’s factual findings.  The judge ruled that Honda was dishonest when it wrote in a letter to Keays that two doctors chosen by the employer ‘both believe that you should be attending work on a regular basis.”  The majority of the SCC found that this was a completely accurate statement and therefore not dishonest, even though they later acknowledge that one of those doctors (Brennan) testified that he had no opinion on whether Keays could regularly attend work because he had neither diagnosed or even met him.  How is the trial judge’s conclusion that the letter was misleading and dishonest on this point a ‘palpable and overriding error’?
Rant 2:  In my practice as a labour lawyer, I often experienced this situation:  an employer/insurer doubts (or doesn’t like) the medical opinion of the doctor used by an employee and insists that the employee go to a doctor selected (and often paid by) the employer/insurer.  This is what Honda did here (as did Keays’ insurer, which cut him off benefits after the insurer’s doctor concluded Keays could work).  I am rarely surprised when, after one short examination, these  employer/insurer-selected doctors come back with an opinion that concludes the employee can return to work, often in direct conflict with the opinion of the employee’s regular treating physician. In fact, I would advise the employee to expect this to happen, and it usually did.
It makes business sense for employers to go with whatever opinion best suites their objectives, which is usually to get the employee back to work or to dismiss the employee.  Should the employer/insurer be able to select its own doctors and then rely on their opinions over those of the employee’s own physicians?  The SCC concluded that employers should be able to do this, ruling that: “…even if one were to conclude that Dr. Brennan (the employer’s doctor) was taking a somewhat ‘hardball’ approach to workplace absences, Honda cannot be faulted for accepting his expert advice.”  As the minority judgement noted, this permits employer’s to shop around for medical opinions that favour the employer’s productivity interests over the interests of the employee in receiving the best medical support.
Legal Point 1:  In discussing aggravated damages (damages for mental suffering caused by the dismissal), the majority ruled that ‘there is no reason to retain the distinction between ‘true aggravated damages’ resulting from a separate cause of action and moral damages resulting from conduct in the manner of termination’. (para. 59)  That is because, now, damages are available whenever an employer engages in bad faith conduct in the manner of dismissal that causes ‘foreseeable damage’ to the employee.   I have argued before that ‘Wallace damages’ could not be ordered for conduct that breaches a term of the employment contract, because Wallace clearly applied only to conduct that ‘falls short of a breach of contract’.  What’s new here is that the Court appears to put to an end the practice of simply extending notice damages whenever an employer engages in bad faith in the manner of dismissal.  Instead, an employee must now prove they suffered actual damages from the bad faith of the employer and that the damages were forseeable.  That will make it more difficult for an employee to receive damages for bad faith discharge.  On the other hand, if the employee has suffered proveable and forseeable damage, then she should now be entitled to the full scope of those damages.   This is because the Court ruled that bad faith damages ‘will be awarded not through an arbitrary extension of the notice period, but through an award that reflects the actual damages‘.   This seems to suggest that these damages are no longer restrained by the court’s own arbitrary caps on wrongful dismissal damages (12 months’ notice for non-managerial employees, 24 months’ notice for managerial employees).  So, it is harder to get the damages, but if an employee meets the standard, the scope of damages may be significantly larger than before.  Follow?
Legal Point 2:  Keays argued that he is entitled to aggravate damages for breach of the Human Rights Code’s disability discrimination provisions.  The majority ruled that a breach of human rights legislation cannot satisfy the requirement to establish an independent wrong necessary to obtain punitive damages (para. 64).   Keays might have argued also (or instead) that the employer’s conduct prior to the dismissal amounted to a breach of the implied duty in all employment contracts to treat employees with “decency, civility, respect, and dignity” (for a history of this term, see the paper I link above).  I would argue that that term was breached by Honda in a number of respects, even accepting the majority’s spin on the facts.  
For example, the SCC ruled that Honda acted ‘egregiously’ when it told Keays that his decision to retain a lawyer “was a mistake and that it would make things worse” (para. 77).    The majority found that this was ‘ill-advised and unnecessarily harsh’. Honda’s statement to Keays that Dr. Brennan ‘believes that you should be attending work on a regular basis’ was a clear breach of the implied duty.  Dr. Brennan had not yet formed any opinion on the matter, as the majority itself notes.   Honda’s decision not to respond to Keays’ lawyer’s requests for information could also amount to a breach of the duty to treat employees with respect.  One could argue more fundamentally that the employer’s suspicion that Keays was freeloading and being dishonest about the restrictions imposed by his disability was a breach of the implied duty to treat employees with respect and decency.   However, this argument would have be undermined here because of Keays’ failure to obtain a clear diagnosis that he had Chronic Fatigue.  The lack of that diagnosis created a reason for the employer to express doubt about his condition. 
A breach of the implied duty of decency would give rise to damages in the normal course provided that the employee can establish that he/she suffered damages as a result of the breach.
That’s my 2 cents’ worth.  Comments are welcome, as always.