Honda Canada Inc v Keays

Honda restated the law on damages for the manner of dismissal. Wallace-style notice extensions are abolished. Compensation for mental distress flowing from the manner of dismissal is recoverable as ordinary contract damages on Hadley v Baxendale principles.

Keays, a Honda employee with chronic fatigue syndrome, was dismissed after a series of accommodation disputes. The trial judge awarded extraordinary punitive and "Wallace bump" damages.

(1) Are Wallace-style bumped notice damages still available? (2) How are mental-distress damages assessed in employment dismissal?

No to (1). Mental-distress damages are recoverable as ordinary contract damages where reasonably foreseeable.

Damages for the manner of dismissal are not assessed by adding a notice bump but as compensatory damages calculated on Hadley v Baxendale principles. Mental distress is recoverable if it was reasonably foreseeable at contract formation. Punitive damages are reserved for conduct that is so malicious or reprehensible as to depart from ordinary standards of decency (Whiten v Pilot Insurance).

Bastarache J held that the Wallace bump conflated tort and contract concepts, and produced unprincipled inflation of awards. Mental distress for the way termination occurred falls within the contemplation of parties to employment contracts. Punitive damages require independent actionable wrong or particularly egregious conduct.

Restated employment-dismissal damages doctrine. Cited in every wrongful-dismissal mental-distress claim. Subsequent cases (Saadati v Moorhead) refine recovery for psychological injury more generally.

Honda Canada Inc v Keays, 2008 SCC 39, [2008] 2 SCR 362.

McLachlin CJ, Bastarache J, Binnie J, LeBel J, Deschamps J, Fish J, Abella J, Charron J, Rothstein J