Keays v. Honda: SCC ruling a catastrophe for employees

On Friday, the Supreme Court of Canada released its long awaited decision in Keays v. Honda.  The full text of the decision can be read here.

Below is my practical overview of the decision and how it will impact employee dismissals, moving forward.

1.  The court confirmed that the proper analysis used to determine reasonable notice, should remain consistent with the Bardal principles.  Reasonable notice should be assessed based on the employee’s age, tenure, character of employment and the availability of similar employment, having regard to training qualifications and experience.  By doing so, the SCC clarified that the distinction between whether the employee was managerial or not should be less relevant.  It is the entire test that should be dispositive.

2.  The “catastrophic” aspect of this case, in my view, relates to the Court’s decision to abolish the former Wallace principle, which allowed the court to extend the period of reasonable notice, based on the manner of dismissal.  Although the Court clarified that damages based on the manner of dismissal are still compensable, in essence, the Court’s decision will limit or restrict the punitive or ‘deterrant’ effect of such awards and focus on compensating employees for actual losses suffered.  The problem lies in the new requirement, from this case, to show evidence of actual harm suffered in order to obtain compensation for mental distress surrounding dismissals, which will make mental distress damages harder to obtain.  By imposing this onus on employees, employers have less incentive to protect employees at a time when they are vulnerable ie. at the time of their termination — because potential harm is no longer significant.

3.  I will call the new and unified approach to damages for mental distress and the conduct of dismissal, emanating from this decision, as “Keays damages” – which will replace the former Wallace damages and aggravated damages.  Keays damages represent mental distress damages for the manner of dismissal.  In order for employees to obtain Keays damages, they must prove that the employer’s conduct has resulted in actual harm, such as, for example, a longer period of unemployment or reduced re-employment prospects.  For their part, employers will argue that the employee’s mental distress is not compensable where the employee has produced no evidence of of an actual loss.  We will have to wait for lower court decisions to interpret this case and develop a body of jurisprudence setting out the paramaters of and quantum of Keays damages.

4.  The SCC overturned the Court of Appeal’s confirmation of the trial decision, which stated that discrimination is an independant actionable wrong, which was required in order to obtain punitive damages.  The Court confirmed that actions for discrimination should be before human rights tribunals – although, I view this as inconsistent with the recent changes to the human rights scheme, in Bill 107, which expressly permit employee’s to seek damages for discrimination before court’s as well as human rights tribunals.

Daniel A. Lublin is an employment lawyer focussing on the law of dismissal.  Reach him at [email protected] or through his website