August 15, 2008
A late June decision by the Supreme Court of Canada has Canadian employers breathing a bit easier. The landmark case of Keays v. Honda Canada eliminated a $500,000 punitive damages award handed down by a lower court.

The judgment stated that such damages must be awarded only in “exceptional cases,” where the employer’s “advertent wrongful acts…are so malicious and outrageous that they are deserving of punishment on their own.”

Kevin Keays began work at Honda in 1986. He started receiving long term disability (LTD) benefits in 1996 and was diagnosed with chronic fatigue syndrome (CFS) in 1997. His LTD benefits ceased after December 1998, following an evaluation conducted on behalf of the company’s insurer.

When he returned to work, Honda exempted Keays from the company’s attendance-related progressive discipline policy. Keays was required to provide a medical note for each absence, which was not required of employees suffering from what was termed “mainstream” illnesses.

The absences continued and Honda hired a doctor to assess Keays. In turn, Keays hired a lawyer. The lawyer sought clarification from Honda’s doctor, but the auto giant refused to deal with Keays’ lawyer, and then made Keays subject to its attendance policy. When Keays continued to refuse to meet with Honda’s doctor without Honda clarifying the purpose of the meeting, the company terminated his employment for insubordination.

The original trial resulted in the judge awarding $500,000 in punitive damages. The subsequent court of appeal upheld the principle of a punitive damages award, but reduced the amount from $500,000 to $100,000.

The late June judgment by the Supreme Court of Canada set aside the trial judge’s findings and eliminated the entire punitive damages award.

For employers, the higher court decision eliminates what had been seen as a very expensive precedent for employers. It is also felt that the decision takes significant steps in strengthening an employer’s ability to manage absenteeism in the workplace.