Wrongful Dismissal - Bad Faith Damages in Canadian Employment Law: Honda Canada Inc. V. Keays

By Lublin, Daniel A. | University of New Brunswick Law Journal, Annual 2009 | Go to article overview

Wrongful Dismissal - Bad Faith Damages in Canadian Employment Law: Honda Canada Inc. V. Keays


Lublin, Daniel A., University of New Brunswick Law Journal


The point at which the employment relationship ruptures is the time when the employee is most vulnerable and hence, most in need of protection. In recognition of this need, the law ought to encourage conduct that minimizes the damage and dislocation (both economic and personal) that result from dismissal. (1)

It is one of the most important concepts in workplace law--or at least it was. Since Justice Iacobucci's decision in Wallace, employers have had to play nicely at the time of dismissal or risk paying additional damages to dismissed employees. This behaviour expectation was a welcome shift in the law, brought on by the recognition of the inherent power imbalance in the employment relationship and the need to protect employees at a time when they are most in need of protection.

Before Wallace, employers could play legal hardball with relative impunity. Trumped-up allegations of misconduct, bogus reasons for dismissal, malicious references, or dragged out litigation based on frivolous defences may have been improper conduct, but there was seldom an incentive to stop it.

Then came the case of Jack Wallace, a fifty-nine-year-old printing press salesman who, after fourteen years of stellar service, was dismissed without explanation based on false allegations of misconduct that were deliberately created in order to mount a defence to his legal claim. The Supreme Court found that the employer's conduct in handling Wallace's dismissal was so cruel that normal employment law damages, which indemnify lost salary only, could not adequately compensate him for his loss. Iacobucci J, who wrote the decision, reasoned that employees were particularly vulnerable at the time of dismissal and in need of additional protection. With the stroke of a pen, the duty of good faith then became the law of the land. Employers who breached this duty would pay additional "bad faith damages", above and beyond the employee's normal severance.

The Supreme Court's recent decision in Honda v. Keays has reversed these standards again. (2) Gone is the principle of extending the notice period for bad faith behaviour. Instead, the courts are to award damages based on an employee's actual loss.

This paper will:

1. Summarize the Keays decision as it relates to damages for mental distress and bad faith;

2. Discuss how the courts should award damages for mental distress and bad faith in light of Keays;

3. Discuss some of the problems with the majority's approach in Keays; and

4. Conclude by suggesting that the minority's decision should be preferred.

KEAYS V. HONDA CANADA INC.--BACKGROUND

Kevin Keays participated in the production of the first vehicle to roll off the assembly line at Honda's plant in Alliston, Ontario, in 1986. Keays was a dedicated and proud employee and intended to devote his working life to Honda. Unfortunately, his plans were thwarted by his health problems.

After a brief stint on the production line, Keays was moved to the quality engineering department. Despite receiving excellent performance ratings for most of his work, Keays received negative attendance assessments. Keays' coworkers bemoaned the extra responsibilities brought on by having to cover for his mounting absences.

Keays' health deteriorated and he was diagnosed with Chronic Fatigue Syndrome ("CFS"). He was eventually forced off work and onto Honda's long-term disability insurance plan for a two-year period. In 1998, Honda's disability insurer, London Life, terminated Keays' benefits, arguing that there was not enough objective medical evidence of Keays' illness to support his continued absence from work.

Under protest, Keays returned to Honda in December, 1998. Within a month of his return to full-time work, Keays needed more time away. In August, 1999, Keays was disciplined for his absences. Disagreeing with that decision, Keays complained that he was unable to live up to Honda's attendance expectations. …

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