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Only outrageous conduct warrants punitive damages

JULY 4, 2008

“Courts should resort to punitive damages [only] in exceptional cases and the employer´s conduct [ ] was not sufficiently egregious or outrageous as to warrant such damages.” So ruled the Supreme Court of Canada in its Honda Canada v Keays decision and so ends the uncertainty that has plagued employers since Honda´s controversial dismissal first gained national attention.

When a 14-year worker complaining of chronic stress refused to undergo an assessment by a company doctor, Honda dismissed the worker.

At trial, the employee was awarded 14 months´ reasonable notice, 9 additional months´ aggravated damages for the mental distress caused by the company´s bad faith, and $500,000 in punitive damages to deter such conduct. On appeal, the punitive damages were reduced to $100,000 but the original ruling was otherwise upheld.

The Supreme Court has re-affirmed the 14 months´ notice but struck down the aggravated damages, ruling the company acted reasonably in trying to gain legitimate information about the worker´s condition. Reasoning that aggravated damages, otherwise known as ‘Wallace damages´, are themselves intended to act as a deterrent, the Court saw no basis whatever for piling on of punitive damages.

The Honda Canada v. Keays decision reassures employers that legitimate demands may be made on employees, who have a duty to comply. The decision also confirms that additional damages for mental distress will be awarded only in dismissals that are flagrantly mishandled, and employer misconduct would have to be over-the-top to justify punitive damages.


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