In a year already crowded with eye-catching employment law decisions -- Dunsmuir v. New Brunswick, 2008 SCC 9, Evans v. Teamsters Local Union No. 312008 SCC 20, Mulvihill v. Ottawa (City), 2008 ONCA 201-- last week, the Supreme Court of Canada released the most important of them all, Honda Canada Inc. v. Keays, 2008 SCC 39.
Keays confirms the trend those other decisions gestured towards, employment contracts appear, more than ever before, to be contracts like any other. Supreme Court jurisprudence in the 1980s and '90s broadly accepted that human labour was not a commodity like all others (see, for e.g., Machtinger v. HOJ Industries Ltd., [1992] 1 S.C.R. 986). Inequalities of bargaining power and information asymmetries at the moment when the contract is formed, during its lifespan, and, indeed, when it is terminated pervade the employment relationship. To be sure, these inequalities can cut in different directions depending on the particular industry at issue and the surrounding economic climate, but, nonetheless, by and large, employees remain financially dependent and vulnerable on employers. Recognizing these particulars, the common law has attempted with varying degrees of success to treat employment law as a sui generis branch of contract law by obligating the employer to provide reasonable notice of termination, reasonable accommodation of employee disabilities, and good faith and fair dealing at the moment of termination (see Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701).
An employer's breach of the duty of good faith and fair dealing at termination gave rise to the award of what became known as "Wallace damages" or the "Wallace bump," typically the additional of several months of pay tacked on to the period of reasonable notice owed to the employee. Claiming Wallace damages quickly became standard issue for plaintiffs (see Yanez v. Canac Kitchens), and courts struggled to award such damages with consistency and coherence. Were Wallace damages subject to mitigation? Were they aggravated damages? What type of harm needed to be proved? What types of employer behaviour crossed the line into bad faith and unfair dealing? Why should the quantum of damages depend on one's monthly wage?
In Honda v. Keays, Justice Bastarache and the majority bring much needed clarity to the Wallace confusion, but in application blunt other of employment law's necessarily unique features. Drawing on the Court's ruling in Fidler v. Sun Life Assurance, [2006] 2 S.C.R. 3, Bastarche J. makes clear that in employment contracts, damages emanate from the principle of Hadley v. Baxendale, namely, the reasonable contemplation of the parties when the contract was formed. Since Wallace imposed upon employers the duty of good faith in the manner of dismissal, "[f]ailure to do so can lead to foreseeable compensable damages" so long as employees can prove damages causally related to the bad faith or dishonest manner of dismissal (at paras. 58, 59). Such damages, if proven, will be fixed and compensatory -- no more incongruous extensions of the period of reasonable notice.
Fine. Both the majority and the minority agree in the prudence of the new approach, and they are right to do so. But in applying these principles to the facts at hand, the majority offers an impoverished view of the contents of duty of good faith, as well as duty to accommodate. If the duty to treat employees fairly and to accommodate their disabilities is devoid of substance, if it is a perfunctory illusion, then employees are in a precarious position indeed.
The trial judge and the three members of the Ontario Court of Appeal were unanimous in their assessment that Honda had treated Kevin Keays, a sufferer of chronic fatigue syndrome, unfairly and in a discriminatory fashion in terminating his employment. There was, as Justices LeBel and Fish point out in dissent, ample evidence to do so. In disregarding the trial judge's findings of fact, the majority holds that Honda was fully entitled to take the expert opinion of its medical doctors -- both of whom seemed suspicious of the veracity of Keays' condition -- at face value. But such an approach fails to recognize that company-employed doctors are hardly neutral observers. Of course employers need to be able to deal with absenteeism in the workplace. Of course employees must cooperate with employers in supplying the relevant medical information pertaining to their requests for accommodation. But all of this must take place in the context of good faith dealings. Honda, by subjecting Keays to progressively harsher treatment, especially after he retained counsel, breached that duty. In validating Honda's -- at best, intimidating -- treatment of Keays the majority undercuts the good faith that stands at the heart of the duty to accommodate (see British Columbia (Public Service Employee Relations Commission) v. BCGSEU, [1999] 3 S.C.R. 3).
We do little service to the modern workplace by returning employment law to the hard-nosed contractual model of its master and servant roots.
