Wednesday, October 18, 2006

Honda and Keays Appeal: Court Rolls Back $500,000 Punitive Damages Award against Honda

An update on Honda and Keays, originally discussed here:

An unprecedented $500,000.00 punitive damages award against Honda in this wrongful dismissal action has been decreased to $100,000 by the Ontario Court of Appeal.

Notwithstanding the reduction in the damages awarded, the case remains extremely important and will be of significant influence in subsequent cases considered by Ontario courts.

With this decison, the Ontario Court of Appeal specifically acknowledged the appropriateness of punitive damages awards against employers who discriminate, harass or fail to accommodate disabled employees. The Court also raised the bar as to the amount of punitive damages to be awarded in such cases, and signalled significantly increased exposure for employers found to engage in such misconduct.

Mr. Keays was employed at Honda Canada for 14 years. At trial, the Court found that for the final seven months of his employment, he was subjected to harassment and discrimination by his employer, which had refused to accomodate Mr. Keays' disability due to Chronic Fatigue Syndrome.

At trial, the Ontario Superior Court of Justice held that Mr. Keays had been constructively dismissed, and awarded damages against Honda for wrongful dismissal and for its bad faith in connection with the termination. The trial Court awarded the further sum of $500,000.00 in punitive damages, based on "Honda's outrageous mistreatment of their long term employee."

In reducing the original punitive damages award, the Court of Appeal balanced the legitimate objective of "punishing" the employer against a requirement of proportionality based on the specific facts of the case.

The Ontario Court of Appeal found that $500,000 was not a "rational" punishment for Honda Canada's misconduct, after weighing the length and severity of the harassment and discrimination endured by Mr. Keays, considering the other damages awarded to him, and reviewing the range of punitive damages awards in comparative matters.

The Court, however, did find that punitive damages were mandated in this matter:

...the conduct by [Honda] was planned and deliberate and designed to intimidate and ultimately terminate the employment of a particularly vulnerable employee.
In a 2-1 decision, the Court of Appeal concluded that punitive damages in the amount of $100,000 were appropriate. In a dissenting opinion, Mr. Justice Goudge upheld the original $500,000.00 award.

While perhaps less groundbreaking than the original trial judgment, the Court of Appeal's ruling in favour of Mr. Keays sends a strong message that Ontario courts will now award significant punitive damages against employers who harass, discriminate or fail to accommodate the medical requirements of disabled employees.

Excerpts from the Court of Appeal's decision are below:

The punitive damage award in this case is on the same scale as awards in Whiten [$1 million] and Hill v. Church of Scientology of Toronto, [1995] 2 S.C.R. 1130 [$800,000]. Punitive damage awards in other wrongful dismissal cases have been far more modest even in the face of serious misconduct such as slander of the employee. The awards in such cases have been in the range of 15,000 to $50,000 and, rarely, up to $75,000.

In my view, a punitive damage award on the scale imposed in this case can be justified only by extraordinary circumstances of a similar nature to those in Whiten and Hill. Since Whiten, like this case, is a contract case, I found it to be the most reasonable comparator. Thus, I think it helpful in considering the application of the factors identified in Whiten, to bear in mind the facts of Whiten as they compare to this case.

Another factor mentioned in Whiten as part of the proportionality analysis is the need to consider the totality of all other penalties including compensatory damages imposed on the defendant. In this case, the trial judge had to bear in mind that he had already increased the damages for wrongful dismissal in accordance with Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701 for essentially the same conduct that attracted the punitive damage award. The trial judge stated that he was taking into account "all the circumstances, including the compensatory awards already made", but it is unclear on what basis he did so.

The final factor to be considered is the need for the punitive damage award to be proportional to the advantage wrongfully gained. As the court held in Whiten at para. 124: "A traditional function of punitive damages is to ensure that the defendant does not treat compensatory damages merely as a licence to get its way irrespective of the legal or other rights of the plaintiff." Even accepting the trial judge's finding that the appellant wanted to terminate the respondent because his prolonged absences were interfering with the smooth running of the operation, there is nothing on the record to show that the appellant saw the possibility of wrongful dismissal damages as nothing more than a licence fee.

I conclude by returning to the comparison of this case to Whiten. Two factors stand out when comparing the two cases. First, in Whiten there was a two-year period of escalating misconduct up to the trial. Here the misconduct was for no more than seven months and is largely focused on the events of March. I have already referred to the trial judge's mischaracterization of a five-year period of outrageous conduct. Although the trial judge identified one instance of late disclosure of a letter in the conduct of the trial, this does not extend the period of misconduct by Honda to the five years referred to by the trial judge. Second, in Whiten, the defendant persisted in its course of conduct, based on a theory that the plaintiff deliberately set the fire, in the face of repeated findings from its own experts and advisors that the fire was accidental. Binnie J. described the defendant's attitude to the plaintiffs at para. 4 as "harsh and unreasoning opposition" and an attempt to "exploit a family in crisis". That is not the case here. The appellant 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.

I come then to the difficult problem of assessing the quantum of punitive damages bearing in mind the overarching principle that the award must be "that amount, and no less, [that is] rationally required to punish the defendant's misconduct" (Whiten at para. 96, emphasis in original).

Bearing in mind the trial judge's findings that can be supported by the evidence, and in particular the findings that the conduct by the appellant was planned and deliberate and designed to intimidate and ultimately terminate the employment of a particularly vulnerable employee and that the appellant was aware of its continuing duty to accommodate, an award in excess of those awarded in other wrongful dismissal cases is appropriate. But, given the compensatory damages awarded, especially the Wallace damages, and that there were no special factors requiring deterrence such as a pattern of abuse or the kind of conduct found in Whiten, as well as the relatively short duration of the misconduct, in my view, an award of no more than $100,000 can be justified.

- Annie Kenet and Garry J. Wise, Toronto

Visit our Website:

No comments: