Thoughts from a Management Lawyer

Your Help is Needed

As readers of this blog may know, I am an Adjunct Professor at Woodsworth College, University of Toronto, where I have taught the employment law course for the last 10 years.  I'm in the process of updating the course book for September.

I need your help in pulling together some of the more important employment law cases decided over the past 12 months in Ontario or coming out of Ontario.  Not labour cases or human rights or other cases of that nature.  Just pure employment law cases. 

So, as an example, Keays which came out of Ontario is on the list as is Wronko from the Court of Appeal. 

I would be tremendously grateful if you could either leave a comment or send me an email with your suggestions of some important Ontario employment cases that have come out of any level of court in the past 12 months or so. 

Thanks in advance for any help you can offer.

Last Keays v, Honda Pots (for awhile)

Having posted on this blog about Keays v. Honda Canada, I wrote a Legal Alert that you can access on our firm website.  Just go to the Publications page. 

Unpacking Keays v. Honda - Part III

This post deals with those aspects of the Keays case that deal with so-called Wallace damages.  Thought I have dealt with Wallace damages numerous times on this blog and elsewhere, following the Keays case those comments should be taken with a grain of salt.

The Court took the occasion to, in effect, revisit Wallace-damages and, in so doing, dealt a significant blow to plaintiffs who advance these claims.  The Court felt that this re-assessment was necessary in light of its recent decision in Fidler v. Sun Life Assurance Co. of Canada.

Wallace established that the employer had an obligation not to act in bad faith towards the employee at the point of discharge. Where it was found that the employer acted in bad faith, courts in common law provinces would extend the period of notice by some amount (this is sometimes known as the “Wallace bump”).

In analyzing Wallace damages, the Court went back to the 1854 case of Hadley v. Baxendale where it was held that damages are recoverable for a contractual breach if the damages are “such as may fairly and reasonably be considered either arising naturally... from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties.”

The first question, then, when dealing with an employment case is: what did the parties contemplate at the time of the formation of the contract?

The Court held that:

At the time the contract was formed, there would not ordinarily be contemplation of psychological damage resulting from the dismissal since the dismissal is a clear legal possibility. The normal distress and hurt feelings resulting from dismissal are not compensable. The Court then affirmed that in the employment law context, damages resulting from the manner of dismissal will be available if they result from the circumstances described in Wallace, namely where the employer engages in conduct during the course of dismissal that is “unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive”. In other words it would have been in the contemplation of the parties at the time the contract was formed for damages to result when the circumstances described in Wallace are present. It would be both foreseeable and compensable.

But how would this be compensated? Since the release of Wallace in 1997 common law judges have compensated employees for bad faith conduct of the employer through an extension of the period of reasonable notice. The Court determined that this approach was incorrect. Mr. Justice Bastarache held:

….. if the employee can prove that the manner of dismissal caused mental distress that was in the contemplation of the parties, those damages will be awarded not through an arbitrary extension of the notice period, but through an award that reflects the actual damages. Examples of conduct in dismissal resulting in compensable damages are attacking the employee’s reputation by declarations made at the time of dismissal, misrepresentation regarding the reason for the decision, or dismissal meant to deprive the employee of a pension benefit or other right, permanent status for instance.

In other words, the Court will have to come up with an actual number reflecting the damages that the employee suffered, if any, by reason of the “bad faith” conduct of the employer.

This methodology should limit the circumstances in which damages formerly known as Wallace-damages will be awarded.

This is welcome as Wallace claims have, since 1997, Wallace claims have been advanced in a whole range of circumstances where they had little, if any chance of success.  Though so-called specious Wallace claims had been criticized in the past in a number of cases (for example, see this discussion and Yanez) the Supeme Court's treatment of Wallace should serve to limit these claims to the most exceptional circumstances and then only where damages can be assessed under Hadley principles. 

Again, as was observed by Mr. Justice Iaccobuci in Wallace these are not "automatic claims .. in every case of dismissal."  As with punitive damages, these are exceptional claims. 

 

Follow Your Favourite Labour and Employment Blogs - It's Easy

How do you follow your favourite labour and employment blogs?  Many people use RSS readers of one sort or another.

But following your favourite law blogs just got a whole lot easier now that LexMonitor has come on the scene.  The editors say that they "want to make content from the legal blogosphere more accessible, meaningful, and valuable by highlighting discussion, blogs, tags, and authors you may wish to follow".

You can use the RSS feature to add to your reader.  Here's the Labour (or Labor) and Employment page. 

If you struggle with keeping up with all of your favourite blogs, check out LexMonitor.

Happy Canada Day!

 On this Canada Day, take the What's Your Score, Eh? quiz.

Unpacking Keays v. Honda - Part II

The unprecedented award on account of punitive damages is what the Keays case is most known for.  That's what I'll now discuss.

It will be recalled that the trial judge determined that Mr. Keays was entitled to $500,000 in punitive damages following his conclusion that the employer had failed in their obligation to accommodate Mr. Keays contrary to the Ontario Human Rights Code. 

The Court of Appeal that heard Keays agreed that a breach of human rights legislation could be an actionable wrong for purposes of founding a claim for punitive damages.  A majority reduced the quantum of the punitive damages award to $100,000 while Mr. Justice Goudge, in the minority, would have upheld the trial judge's award of $500,000.  

The Supreme Court blew this entire aspect of the case out. 

Punitive Damages - Generally

The first thing the Court did was to clarify those circumstances in which punitive damages can be awarded in an employment case.

In Vorvis, McIntyre J., for the majority, determined that punitive damages are only recoverable where the defendant’s, that is the employer's, conduct is said to give rise to a claim that is itself  “an actionable wrong”.  

Mr. Justice Binnie clarified the matter in the Whiten v. Pilot Insurance case where he noted that an "actionable wrong" does not require that the defendant committed an independent tort and, instead, that a breach of the contractual duty of good faith could qualify as an independent wrong for purposes of punitive damages. 

The trial judge and the Court of Appeal in Keays concluded that “discriminatory conduct” would amount to an independent actionable wrong for the purposes of establishing a claim for punitive damages.   The Court of Appeal concluded that Bhadauria only precluded "a civil action based directly on a breach of the Code – but [did] not preclude finding an independent actionable wrong for the purpose of allocating punitive damages."

Mr. Justice Bastarache disagreed:

In that case [Bhadauria], this Court clearly articulated that a plaintiff is precluded from pursuing a common law remedy when human rights legislation contains a comprehensive enforcement scheme for violations of its substantive terms.  The reasoning behind this conclusion is that the purpose of the Ontario Human Rights Code is to remedy the effects of discrimination; if breaches to the Code were actionable in common law courts, it would encourage litigants to use the Code for a purpose the legislature did not intend — namely, to punish employers who discriminate against their employees.  Thus, a person who alleges a breach of the provisions of the Code must seek a remedy within the statutory scheme set out in the Code itself.  Moreover, the recent amendments to the Code (which would allow a plaintiff to advance a breach of the Code as a cause of action in connection with another wrong) restrict monetary compensation to loss arising out of the infringement, including any injuries to dignity, feelings and self‑respect.  In this respect, they confirm the Code’s remedial thrust.

In other words, the Code "provides a comprehensive scheme for the treatment of claims of discrimination and Bhadauria established that a breach of the Code cannot constitute an actionable wrong; the legal requirement is not met."

Even if a breach of the Code could amount to an actionable wrong, which the Court said it could not, then the Court took the occasion to reiterate that punitive damages will only be awarded where the "conduct meriting punitive damages" is “harsh, vindictive, reprehensible and malicious”, as well as “extreme in its nature and such that by any reasonable standard it is deserving of full condemnation and punishment”"

Furthermore, punitive damages are an exceptional remedy and there must be both rationality, proportionality as well as an avoidance of duplication of damages. 

In the end, the Court held that "Honda’s conduct was not sufficiently egregious or outrageous to warrant an award of punitive damages under the Whiten criteria."

Significance

The fact that a breach of human rights legislation is not an actionable wrong that could ground a claim for punitive damages is of extreme significance though not entirely surprising given the approach the Supreme Court has taken in past cases. 

In addition, the fact that the Court emphasized that an award of punitive damages is exceedingly rare is helpful as is the discussion about rationality of the amount of the award and the proportionality of the total monetary damages package.  

Punitive damages have been claimed with increased frequency after the Court of Appeal decision in Keays.  One hopes that the Supreme Court of Canada's decision in Keays will send the message that such claims are, indeed, exceptional and should be plead judiciously and sparingly and then only in the most egregious of circumstances. 

It remains to be seen what, if any, effect the amendments to the Code might have on this discussion. 

Unpacking Keays v. Honda Canada - Part I

At a practical level, what does the Supreme Court of Canada's decision in Keays v. Honda Canada mean?  Well, it's early days, but I will write a few posts on this and consider the following areas that come out of the case and my own thinking on the issues:

1. What factors can/should properly be considered in determining the period of reasonable notice of termination?
2. Will the Court establish an cause of action for breach of human rights legislation that can be pursued civilly?
3. Can a breach of human rights legislation found an independent actionable wrong for purposes of a claim for punitive damages?
4. What will the Court do with the 9 month Wallace award?

For the background to the case read this article. 

Factors Properly Considered in Determining Reasonable Notice

Courts have considered a growing variety of factors when determining the appropriate period of reasonable notice of termination in any given case.  They have been quick to point out that this determination is “more art than science” and have resisted any formula based approach when deciding on the notional period of reasonable notice such as the ever-popular “month per year of service” rule of thumb (see, for example, Minnott and this earlier post). 

Traditionally, and recognizing that there is no closed set of factors, the Court has relied upon the seminal case of Bardal v. Globe and Mail and the four factors listed in that case:

1. the character of the employment,
2. the length of service of the servant,
3. the age of the servant and
4. the availability of similar employment, having regard to the experience, training and qualifications of the servant.

The trial judge in Keays considered these factors in determining that the period of reasonable notice was 15 months. In arriving at this number, the trial judge also considered “Honda’s “flat” (i.e., egalitarian) management structure as limiting the effect of Keays’ lower position in Honda’s hierarchy; the fact that Keays had specialized training to compensate for his lack of formal education; his long service; and the lack of comparable employment in Alliston.”

Mr. Justice Bastarache, on behalf of the majority of the Supreme Court, was critical of the trial judge’s consideration of these “other factors” as they gave little insight into what Mr. Keays actually did.   As Mr. Justice Bastarache said:

It will therefore suffice to say here that Honda’s management structure has no part to play in determining reasonable notice  in this case.  The “flat management structure” said nothing of Keays’ employment. It does not describe the responsibilities and skills of that worker, nor the character of the lost employment. The particular circumstances of the individual should be the concern of the courts in determining the appropriate period of reasonable notice.  Traditional presumptions about the role that managerial level plays in reasonable notice can always be rebutted by evidence. [emphasis added]

The Court also held that no one Bardal factor should be given "disproportionate weight" over the others and, in the circumstances of the Keays case, the Court held that the "In the present case, the trial judge erred in applying one of the factors, alluding to the flat management structure, rather than examining the actual functions of Keays."

In reaching this conclusion, the Court nonetheless refused to reduce the 15 month period of reasonable notice.  In doing so, and despite the comment that no single Bardal factor should be given "disporportionate weight" the Supreme Court of Canada went on to consider the following:

• Keays was one of the first employees hired at Honda’s plant
• Keays spent his entire adult working life with Honda
• Keays did not have any formal education and
• Keays suffered from an illness which greatly incapacitated him.

The Court found that "all these factors will substantially reduce his chances of re‑employment" and justify an assessment of 15 months’ notice.

Significance

This aspect of the Supreme Court's decision provides an endorsement for the historical approach to notice determination where the emphasis is on the circumstances of the individual employee, rather than on other factors that are not necessarily indicative of the specific circumstances of the individual.  It emphasizes that Bardal continues to be the most appropriate approach and that no single factor is more important than the others.

It is often frustrating for clients (and, therefore, their lawyers) that this process is really "art" and not "science".  But I have always believed that a formulaic approach to determining the notice period is problematic and overly restrictive because it locks us into a mechanical application and does not allow for the factoring in of unique and individual circumstances. 

The Court, in Keays, has clearly agreed with and favoured the traditional and individualistic approach to notice determination which, frankly, was not surprising.

Setting the Stage for the Keays v. Honda Case

As I mentioned the Supreme Court of Canada will release its decision in Keays v. Honda this morning.  There's an article in today's Ottawa Citizen that lays out some of the issues.  Clearly, the most watched is what the Court will do with the immence punitive damages award ($100,000 at the Court of Appeal, though Gouge, JA would have affirmed the trial judge's award of $500,000). 

But there are other issues that will have significant implications for the employment law community:

• Will the Court establish an cause of action for breach of human rights legislation that can be pursued civilly?
• Can a breach of human rights legislation found an independent actionable wrong for purposes of a claim for punitive damages?
• What will the Court do with the 9 month Wallace award?

Lots of meaty issues will, hopefully, be clarified in a few hours.  Here is some background information on the lower court judgments.

Update:  The SCC's decision in Keays v. Honda is now available and an article appears in the Globe and Mail entitled Supreme Court erases punitive damages in dismissal case in which I was quoted.  This case promises to generate considerable discussion in the days and weeks ahead as we all digest the significance and subtleties.

Too Busy to Take Vacation? Survey Says... $6.3 billion to employers

The Financial Post's article Too Busy to Take a Vacation describes our "relentless trend" to leave unused vacation time on the table with the effect of "putting $6.3 billion back into the hands of employers, or 41 million discarded vacation days nationwide, according to a study by Ipsos-Reid and Expedia.ca."

While the article is interesting, in itself, it also emphasizes an employment law risk/issue - can an employer, in effect, not pay the employee for unused vacation?  For example, the employee is given 4 weeks vacation per year and only uses 3 weeks, can the employer not pay out the 1 week at the end of the vacation year under a "use it or lose it" approach?

As is often the case, carefully drafted policies and contracts can assist in answering these questions along with consideration of applicable legislation.

Stay Tuned - Keays v. Honda decision to be released on Friday

The Supreme Court of Canada will release its decision in Keays v. Honda Canada on June 27.  The FP Legal Post reports Bad omen for employers: Bastarache authors Honda v. Keays.