In Canadian legal history, there have been only 11 Supreme Court of Canada cases in non-union employment law. When that Court writes a decision, it intends it to make an impact. The recent decision in Keays v. Honda Canada Inc. does that, although its significance has been grossly mischaracterized and misunderstood.
Keays was periodically absent with chronic fatigue syndrome for several years. Honda, noting that his doctor's notes were becoming increasingly limited, ordered him to see its specialist. It warned that failure to do so would result in dismissal. On the advice of legal counsel, Keays demanded to know "the purpose, methodology and parameters of the assessment." When he persisted in refusing the assessment, Honda fired him.
The trial judge awarded 15 months severance, nine months in Wallace damages, $500,000 in punitive damages – a high-water mark in employment law – and increased costs.
The Court of Appeal reduced the punitive damages to $100,000.
The Supreme Court of Canada, however, struck out Wallace, punitives and extra costs, leaving only the basic 15 months severance. It is reasonable to assume Keays' legal costs are many times more than what he ultimately ended up with.
Reports on the case have focused on the removal of punitive and Wallace damages, suggesting they are now much more difficult to achieve. That is incorrect. Moreover, they have misunderstood significant aspects of the case.
Dismissing the employee's medical evidence, Keays' doctor provided uninformative notes so Honda contacted two doctors who were skeptical about his complaint, suggesting a lack of cogent evidence of disability. The company then ordered him back to work. The trial judge concluded Honda was playing hardball. However, the Supreme Court disagreed, noting "Honda had no reason not to accept the expert advice it was receiving" and criticized the trial judge for "faulting Honda for relying upon the advice of its medical experts."
Employers have been averse to questioning employees' doctors and have permitted far too much latitude in time off without cogent evidence of any disability. The Court made clear companies, like employees, are entitled to retain medical experts and rely on their views.
"The employer's responsibility to manage its workforce" provides it with "the right to monitor the absence of employees who are regularly absent."
Determining severance, the Court reaffirmed the primary determinants of severance are the nature of the job, age, length of service and the availability of similar employment. Although it noted that higher status employees are generally entitled to greater severance because their positions are usually more difficult to replace, the Court called on counsel to adduce evidence of this in any particular case.
In Honda's case, although Keays was not a manager, lack of formal education and long illness rendered him less employable. The decision is a message to employers to stop providing severance based on formula and review each case individually.
The Court changed how Wallace damages are defined and determined. The Court noted that nearly always an employee can sue only for the lack of sufficient notice or severance, not for pain associated with dismissal. Such damages can be sued for only in rare cases where both parties understand at the time of hiring that a future dismissal could lead to extraordinary damages.
However, the notion that awards can be made for damages contemplated at the time of hiring creates a greater opportunity for creative employee counsel to obtain Wallace and aggravated damages. Wallace damages also can be based on the manner in which the employee was terminated, such as defaming them, lying about why they were fired or firing them to avoid their pension vesting.
The trial judge faulted Honda for ignoring employee's counsel and dealing directly with Keays after he requested negotiations be with his lawyer. But the Supreme Court noted, as long as the employee was employed "parties are always entitled to deal with each other directly." This underlines employers need not allow employee's lawyers to attend internal management investigations.
Ed.: A version of this article appeared in Howard's weekly column on the first page of the Working section of the National Post. It also appeared in the Ottawa Citizen.