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On June 27, 2008, the Supreme Court of Canada released its long awaited decision in Keays v. Honda Canada Inc. Mr. Keays had been a long-term employee at Honda who was off sick as a result of chronic fatigue syndrome. Honda was not satisfied with the quality of his doctor’s notes and requested that Mr. Keays be seen by their own physician. When he refused, Mr. Keays was terminated by Honda. The resulting legal claim concluded with a trial in which Honda was ordered to pay the equivalent of 24 months salary and punitive damages of $500,000.00. By the time the case reached our highest Court, the punitive damages had been reduced to $100,000.00.

Mr. Keays did not have a good day at the Supreme Court. Concluding that the trial judge had made serious errors in his assessment of Honda’s conduct, the Court reduced Mr. Keays’s damages to the equivalent of 15 months salary and the punitive damage award was set aside.

Much of the commentary hailed the decision as a major victory for employers in Canada. I would beg to differ. The Court has long recognized that employers owe a duty of good faith to employees to be candid, truthful and sensitive to employees at the time of termination. The failure to do so was to be compensated by an increase in the notice period to which the employee would otherwise be entitled. It is true that the Court in Keays eliminated that arbitrary increase. In its place however, employees who suffer mental distress as a result of improper conduct by an employer at the time of termination can now receive an award for such damages. This represents a real breakthrough in the law and overturns at least 100 years of legal authority against such awards. It is now the responsibility of trial and appellate Courts in Canada to flesh out the parameters of the decision. In my view, employers would do well to treat employees with utmost fairness. Anything less raises the possibility that employees will suffer foreseeable damages for mental distress.