## Facts

- Kevin Keays worked for Honda for about 14 years and suffered from chronic fatigue syndrome.
- Keays participated in a disability-related attendance program that required medical documentation for absences.
- Honda questioned the legitimacy of Keays’s absences and required him to attend an assessment with a company-retained occupational medicine specialist.
- Honda warned Keays he would be terminated if he refused to attend the assessment.
- Keays declined to attend without further clarification of the assessment’s purpose and consequences, and Honda terminated his employment.
- At trial, the court found wrongful dismissal, set reasonable notice at 15 months, added 9 months’ pay for manner of dismissal (a “Wallace” extension), and awarded punitive damages; other claims (including discrimination and intentional infliction of mental suffering) were dismissed.
- The Ontario Court of Appeal upheld wrongful dismissal and the 15+9 month award, reduced punitive damages, and otherwise dismissed both parties’ additional claims.

## Issues

1. How should reasonable notice be determined, including whether managerial status presumptively lengthens the notice period?
2. How should damages for bad-faith conduct in the manner of dismissal be conceptualized and quantified (including the propriety of a “Wallace bump”)?
3. Under what conditions are aggravated (mental distress) damages available for the manner of dismissal?
4. When are punitive damages available in a wrongful dismissal action, including whether an independent actionable wrong is required and whether alleged discrimination can supply it?

## Decision

- The Supreme Court of Canada allowed Honda’s appeal in part and dismissed Keays’s cross-appeal.
- The Court upheld 15 months as reasonable notice and rejected presumptions that managerial status automatically increases notice; notice must be set contextually using the Bardal factors.
- The Court held that “Wallace” damages should not be awarded by mechanically extending the notice period; compensation for dismissal-related mental distress must reflect proven, compensable loss under ordinary contract principles.
- On the corrected factual record, the Court found no basis for additional aggravated/mental distress damages beyond the reasonable-notice award.
- The Court set aside punitive damages entirely, holding that the threshold for punitive damages was not met and that no independent actionable wrong was established.

## Legal Principles

- Wrongful dismissal is a contractual claim; absent just cause, the core remedy is damages reflecting what the employee would have earned during reasonable notice, subject to mitigation.
- Reasonable notice is assessed contextually under the Bardal factors (including length of service, age, character of employment, and availability of similar employment); managerial status does not create a presumption of longer notice.
- Employer misconduct in the manner of dismissal can support compensatory damages only if the employee proves actual loss (including mental distress) that is recoverable under ordinary contract-damages rules (including foreseeability).
- “Wallace bumps” are not an appropriate stand-alone method of quantifying bad-faith dismissal damages; courts must assess and award compensation tied to proven harm.
- Punitive damages in the employment-contract context are exceptional, require conduct warranting punishment beyond compensatory remedies, and require an independent actionable wrong; alleged statutory discrimination generally must be pursued within the statutory human-rights remedial scheme rather than repackaged to ground punitive damages in a wrongful dismissal action.

## Conclusion

The Court confirmed a contextual approach to reasonable notice, rejected automatic notice extensions based on employee status, replaced routine notice-period “bumps” with proof-based compensatory damages for dismissal-related mental distress, and eliminated punitive damages absent an independent actionable wrong and truly reprehensible employer misconduct.


Honda Can. Inc. v. Keays, [2008] 2 S.C.R. 362 (Can. 2008)