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Clarity and confusion in employment law remedies: a comment on Honda Canada Inc. v. Keays.

Abstract

This comment provides an overview of and critical commentary on the Supreme Court of Canada's 2008 decision in Honda Canada Inc. v. Keays. The Court's decision in Keays changes the law of employment law remedies in two important respects. First, the Court held that, where a wrongfully dismissed employee suffers mental distress as a result of a harsh or bad faith dismissal, they should be compensated directly for such mental distress rather than through the notice period "bump-up" approach adopted a decade earlier in Wallace v. United Grain Growers. Second, the Court held, contrary to earlier lower court decisions, that discrimination by an employer against an employee could not serve as an independent actionable wrong for which punitive damages could be awarded in a wrongful dismissal action. This comment will address each of these developments.

On the issue of damages for mental distress, this comment argues that the Court's new approach represents a welcome improvement in employment law remedies, because the theoretical basis for Wallace damages had become extremely unclear and, moreover, because significant practical problems had arisen with these awards. This comment then contends, however, that the Supreme Court was incorrect to justify compensatory damage awards on the basis that they should be awarded for all reasonably foreseeable losses arising from a breach of contract (that is, by subsuming these awards into a Hadley v. Baxendale framework). Rather, this comment argues that damages for mental distress in the manner of dismissal should be justified by reference to the employer's obligation of good faith in the manner of dismissal. This position is defended on doctrinal as well as normative grounds.

With respect to punitive damages, this comment argues that the Court was correct in rejecting discrimination as a basis for an award of punitive damages in wrongful dismissal cases. However, this comment then considers an alternative basis on which the Court could have awarded damages on the facts of this case. Specifically, this comment considers whether the Court should have awarded punitive damages on the basis that the defendant, Honda, committed an independent actionable wrong in attempting to dissuade the plaintiff, Keays, from consulting and seeking advice from legal counsel in relation to his dismissal.

Resume

Ce commentaire fourni une vue d'ensemble et une critique de la decision de la Cour Supreme du Canada, en 2008, dans l'arret Honda Canada Inc. v. Keays. La decision de la Cour dans Keays change la loi des recours du droit du travail de deux manieres importantes. Premierement, le Cour a determine que, dans la situation ou un salarie renvoye a tort souffre de detresse mentale severe suite au resultat du renvoi ou de la mauvaise foi de l'employeur, il devrait etre remunere directement pour la detresse mentale plutot qu'a travers la methode d'ajout a la periode de preavis etablie une decennie plus tot dans l'arret Wallace v. United Grain Growers. Deuxiemement, le Cour a tenu, contrairement aux decisions precedentes des Cours inferieures, que la discrimination par un patron contre un salarie ne pouvait pas servir comme un Tort recevable independant pour lequel des dommages dissuasifs pourraient etre attribues dans une action de renvoi a tort. Ce commentaire adressera chacun de ces developpements.

Ence qui concerne la question de dommages pour la detresse mentale, ce commentaire soumet que la nouvelle approche du Cour represente une amelioration apprecie dans les recours du droit de travail, parce que la base theorique pour les recours Wallace etait devenue extremement incertaine et, de plus, parce que des problemes significatifs se sont presentes avec ces dommages. Ce commentaire argumente toutefois, que la Cour Supreme a tort de justifier les dommages compensatoire sur la base qu'ils devraient etre accordes pour toutes pertes raisonnablement previsibles resultant d'une rupture de contrat (en incorporant ces dommages dans un cadre Hadley v. Baxendale). Plutot, ce commentaire plaide que les dommages pour la detresse mentale resultant de la maniere de renvoi devraient etre justifes en reference a l'obligation de l'employeur d' agir de bonne foi dans la maniere du renvoi. Cette position est defendue sur une fondation doctrinale ainsi que normative.

Par rapport aux dommages dissuasifs, ce commentaire plaide que la Cour a eu raison de refuser la discrimination en tant que base pour donner des dommages dissuasifs dans les proces de renvoi a tort. Cependant, ce commentaire considere ensuite une autre base sur laquelle la Cour pourrait avoir attribue ces memes dommages, soit les faits specifiques de ce proces. En particulier, ce commentaire considere que la Cour aurait du attribuer les dommages dissuasifs parce que le defendeur, Honda, avait commis un tort recevable independant en essayant de dissuader le plaignant, Keays, de consulter et demander l'avis d'un avocat par rapport a son renvoi.
  I INTRODUCTION

 II FACTS & LOWER COURT DECISIONS

The Supreme Court of Canada's Decision

III ASSESSING THE COURT'S DECISION

    Abandoning Wallace Damages
      Wallace v. United Grain Growers Ltd.:
        A New Head of Damages for Wrongful Dismissals
      Overruling Wallace: A Positive Change in the Law
    Justifying Damages for Mental Distress in Wrongful Dismissal Cases
      The Mismatch Between the Principle of Reasonable
        Foreseeability and the Rule in Keays
      The Duty of Good Faith. A Stronger Legal Foundation
    A Normative Justification for the Duty of Good Faith and the Rule
    in Keays Punitive Damages

IV CONCLUSION


I INTRODUCTION

It is trite to say that the employment relationship is an important social institution. From an economic perspective, it governs the framework of much of the productive activity that occurs within a society. From an individual's perspective, it is also vitally important. It not only provides a mechanism for subsistence and economic advancement, but it also provides a basis for feelings of self-worth and meaningful social participation. Given the significance of the employment relationship, it is essential that legal remedies are made available to individuals who are wrongfully dismissed. For example, it is settled law that employees are entitled to reasonable notice before they are dismissed--a "notice period"--or compensation in lieu of such notice, and courts are commonly asked to determine how much notice is appropriate in a given case. Until recently, however, the question of whether employers are liable for wrongs that they commit in conjunction with a dismissal was unsettled in Canada. It is with these issues that the Supreme Court of Canada has grappled in Honda Canada Inc. v. Keays (2008). (1) The decision changes the law in this area in two important respects. First, it clarifies and substantially modifies the law of damages arising from mental distress suffered by employees who are wrongfully dismissed. Second, it changes the law of punitive damages arising from wrongful dismissals that involve discrimination. With respect to both types of damages, Keays represents a more conservative approach than the Court has taken in the past, and will likely make these damages more difficult to recover. This case comment will critically examine these issues.

With respect to damages arising from mental distress, this comment will argue that the Court takes a welcome approach in recognizing these kinds of damages, but does so on a misguided theoretical basis. Prior to Keays, courts did not explicitly award these kinds of damages in cases of wrongful dismissal. Instead, in Wallace v. United Grain Growers the Supreme Court held that judges could "bump-up" the notice period (adding what were subsequently referred to as "Wallace damages") in cases where mental distress was caused to the employee by the manner of his or her dismissal, as a means of indirectly compensating the employee. (2) In Keays, the Supreme Court rejected this approach and held that compensatory damages for mental distress should be made explicitly in these cases on the basis that such distress is reasonably foreseeable. This comment will make two assertions about this change in the law. First, this comment will argue that this change represents an improvement in employment law remedies, because the theoretical basis for Wallace damages had become extremely unclear and, moreover, because significant practical problems had arisen with these awards. Second, this comment will contend that the Supreme Court was nonetheless incorrect to justify compensatory damage awards on the basis that they should be awarded for all reasonably foreseeable losses arising from a breach of contract--that is, by subsuming these awards into a Hadley v. Baxendale (3) framework. Rather, I will argue that the rule adopted in Keays is more appropriately justified by reference to the employer's obligation of good faith in the manner of dismissal. I will make this argument on doctrinal as well as normative grounds. In particular, I will posit that the good-faith justification for the rule is normatively defensible on the basis of economic efficiency.

With respect to punitive damages, Keays restricts the availability of these awards in contractual cases involving discrimination, in the employment context as well as more generally. In order for punitive damages to be awarded for breach of contract in Canada, it must be the case that (1) the defendant's conduct was so egregious as to depart markedly from ordinary standards of decency, and (2) the conduct gives rise to an independently actionable wrong in addition to the breach of contract. (4) In Keays, the Court declined to award punitive damages to the plaintiff, even though it found that he had been discriminated against in the manner of his dismissal, on the basis that discrimination cannot be considered an independent actionable wrong for the purpose of awarding punitive damages for breach of contract, because remedies for discrimination are available under the applicable human rights code. This comment will argue that the Court was correct in reaching this decision. Nevertheless, I will also consider an alternative basis on which the Court could have awarded damages in this case. Specifically, I will consider whether the Court should have awarded punitive damages on the basis that the defendant, Honda, committed an independent actionable wrong in attempting to dissuade the plaintiff, Keays, from consulting and seeking advice from legal counsel in relation to his dismissal.

This comment will proceed as follows. In Part II, I outline the facts of the case as well as the decisions of the Ontario Superior Court and the Ontario Court of Appeal. In Part III, I outline the holdings and reasoning of both the majority and dissenting judgments of the Supreme Court of Canada. In Part IV, I critically assess the Supreme Court's decision relating to damages for mental distress and punitive damages in light of the arguments outlined above.

II FACTS & LOWER COURT DECISIONS

In 1986, Kevin Keays became an employee of Honda Canada. He initially worked on the assembly line, and after approximately 20 months joined the Quality Engineering Department. In 1997, he was diagnosed with chronic fatigue syndrome. Because of this, he stopped working and began receiving benefits from a disability insurance policy provided to employees of the company through London Life Insurance. In 1998, London Life discontinued Keays' benefits on the grounds that he was fit to return to work on a full-time basis.

Shortly thereafter, Keays returned to full-time work at Honda, but he was frequently absent from work. Keays was placed in a company program for employees with disabilities, which allowed him to absent himself from a certain amount of work without fearing disciplinary action. Unlike other employees in this program, however, Keays was required to obtain medical notes for each of his absences. While this program did allow Keays to miss a certain number of days of work, Keays' absences exceeded the predictions of his diagnosing physician, Dr. Morris.

In early 2000, Keays' rate of absence increased. This prompted Honda to decide to ask Keays to meet with an occupational medicine specialist, Dr. Brennan. Before this request was communicated to Keays, however, he decided to retain legal counsel. Keays' counsel wrote to Honda on March 17th, 2000, explaining his client's concerns and trying to work towards a resolution of the problems Keays faced. Five days later, Keays met with managers at Honda, who indicated that they wanted Keays to meet with Dr. Brennan. They also indicated that they had not responded to Keays' lawyer's letter, as they had a policy of dealing directly with employees rather than with their counsel. While Keays initially agreed to meet with Dr. Brennan, the next day, on the advice of his lawyer, Keays indicated that he would not meet with Dr. Brennan without clear guidelines regarding the purpose and parameters of the consultation.

After the meeting with Honda's managers, Keays was absent from work for one week. Upon his return, on March 28th, be received a letter from Honda's management indicating that the company no longer accepted that he had a disability which justified his absences. Honda indicated that it expected him to meet with Dr. Brennan and to show up for work. The letter also indicated that Keays would be dismissed if he did not meet with Dr. Brennan. Keays remained unwilling to meet with Dr. Brennan, and he was thereafter dismissed for what Honda termed "insubordination".

Keays brought an action for wrongful dismissal. At the Ontario Superior Court, McIsaac J. found that Honda's requirement that Keays meet with Dr. Brennan was not reasonable, that Keays had a reasonable excuse for not complying with Honda's direction to meet with Dr. Brennan, and that Honda's decision to terminate Keays was disproportionate to the alleged insubordination. (5) The court concluded that Honda did not have just cause to fire Keays.

In awarding damages, McIsaac J. determined that Keays was owed 15 months' notice, in accordance with the principles outlined in Bardal v. Globe & Mail Ltd. (6) Justice McIsaac then considered whether Keays was entitled to an increase in the notice period because of the manner in which he was discharged, in accordance with Wallace. (7) Justice McIsaac found that the manner of Keays' termination was harsh and had caused Keays significant mental distress. (8) For example, the trial judge found that Honda's letter of March 28th (directing Keays to meet with Dr. Brennan, on threat of dismissal) was "callous and insensitive", that "Mr. Keays was being 'set up' when asked to go into Dr. Brennan's office", and that Honda's decision to cancel Keays' accommodation program was a reprisal for his decision to retain outside counsel. (9) Adopting the Wallace approach, McIsaac J. increased the notice period to 24 months.

Having increased the notice period, McIsaac J. rejected two other bases for increasing the damages award. Justice McIsaac rejected Keays' claim for intentional infliction of nervous shock or emotional distress. He also rejected the claim for damages based on a tort of discrimination, which McIsaac J. decided was unavailable as a result of the Supreme Court of Canada's decision in Bhadauria v. Seneca College of Applied Arts & Technology, in which the Court explicitly rejected the existence of such a tort, because the Human Rights Code represents a comprehensive scheme for dealing with discrimination. (10)

Justice McIsaac did allow Keays' claim for punitive damages, however, on the grounds that while discrimination cannot by itself constitute a tort, it may nonetheless be considered an independent actionable wrong which can form the basis of an award of punitive damages. (11) Justice McIsaac found that Honda had discriminated against Keays by not providing sufficient accommodation for his illness. (12) He then made a number of findings relating to Honda's conduct that in his opinion merited punishment in accordance with the considerations outlined in Whiten v. Pilot Insurance Co., (13) the Supreme Court of Canada's leading case on punitive damages. These findings included, among other things, that Honda's "misconduct was planned and deliberate and formed a protracted corporate conspiracy against Mr. Keays", that Honda intended to try to deprive Keays of the compensation to which he was entitled, and that Honda benefited from its misconduct. (14) Because of these considerations, McIsaac J. awarded Keays $500,000 in punitive damages.

In the Ontario Court of Appeal, Goudge J.A. (writing for the court, although dissenting on the quantum of damages) upheld the trial judge's findings of fact with respect to the lack of just cause as well as the award of 15 months' notice. Finding no palpable and overriding error with respect to the trial judge's finding of Honda's bad faith, Goudge J.A. also upheld the "bump-up" of the notice period to 24 months, in accordance with Wallace. (15)

Justice Goudge also upheld the award of punitive damages in its entirety. He rejected Honda's argument that Bhadauria precluded discrimination from constituting an independent actionable wrong for the purpose of awarding punitive damages. (16) He also upheld the trial judge's conclusion that Honda's conduct was sufficiently harsh or vindictive to merit an award of punitive damages. On the issue of quantum, Goudge J.A. held that "while [he] would not have aWarded that sum, it is not so disproportionate as to exceed the bounds of rationality". (17)

Justice Rosenberg (with Feldman J.A. concurring) agreed substantially with Goudge J.A.'s disposition of the appeal, although he lowered the quantum of punitive damages to $100,000. Justice Rosenberg noted that some of the trial judge's findings of facts--for example, that Honda's managers had conspired against Keays, and that Honda's harsh conduct was prolonged--were not supported by the evidence and constituted palpable and overriding errors. (18) Having concluded that certain facts identified by the trial judge as grounds for the award of punitive damages no longer stood, Rosenberg J.A. nonetheless accepted that several other facts found by McIsaac J. were supported by the evidence, and did constitute grounds for the award of punitive damages. Justice Rosenberg also held that Honda's refusal to deal with Keays' counsel was an additional fact that supported the award. (19)

The Supreme Court of Canada's Decision

The Supreme Court of Canada, in a 7-2 split, allowed Honda's appeal. Justice Bastarache, writing for the majority, upheld the 15-month notice period but reversed the "bump-up" to 24 months. The majority also quashed the punitive damages award in its entirety. In dissent, LeBel J. (with Fish J. concurring) would also have quashed the punitive damages award but would have upheld the award of damages for the manner of dismissal.

The majority first considered whether the 15-month notice period was too long. (20) Honda argued that the trial judge had erred in calculating the notice period based on Honda's flat management structure instead of Keays' actual job functions and responsibilities, and that 15 months' notice was excessive because in fact Keays' "responsibilities were minimal and ... he spent a large percentage of his time on data entry." (21) The majority accepted this argument, but nevertheless gave the trial judge's conclusion significant deference, and upheld the 15-month notice period on a consideration of the entirety of the circumstances. (22)

On the issue of damages for the manner of wrongful dismissal, the majority quashed the damages award in its entirety. Reviewing the facts of the case, the majority held that the trial judge made several palpable and overriding errors and that none of the bases on which the trial judge had "bumped up" the notice period, following Wallace, should stand. (23)

These factual conclusions were sufficient to settle the question, as long as the Wallace approach remained good law. Nonetheless, the majority noted the confusion in the law with respect to damage awards of this type and went on to significantly modify the means of determining them. After canvassing a related set of decisions on damages for intangible injuries stemming from wrongful dismissals, the majority concluded that damages for mental distress should be awarded in accordance with the principle of reasonable foreseeability articulated in Hadley v. Baxendale and accepted as applicable to damages for mental distress in Fidler v. Sun Life Assurance Co. (24) By adopting a reasonable foreseeability standard in this context, the Supreme Court expressly rejected the Wallace approach, in which courts would rely on a finding of the employer's bad faith alone, and centered the inquiry instead on whether the mental distress suffered by the employee as a result of the employer's bad faith or unfair conduct was reasonably foreseeable:
   Damages attributable to conduct in the manner of dismissal are
   always to be awarded under the Hadley principle.... The amount is
   to be fixed according to the same principles and in the same way as
   in all other cases dealing with moral damages. Thus, if the
   employee can prove that the manner of dismissal caused mental
   distress that was in the contemplation of the parties, those
   damages will be awarded not through an arbitrary extension of the
   notice period, but through an award that reflects the actual
   damages. (25)


The majority, however, emphasized that not all mental distress would be compensable under this principle. Specifically, the majority noted that "[a]t the time the contract was formed, there would not ordinarily be contemplation of psychological damage resulting from dismissal since the dismissal is a clear legal possibility. The normal distress and hurt feelings resulting from dismissal are not compensable." (26) Rather, the majority suggested that the application of the principle in Hadley and Fidler to claims for mental distress arising from wrongful dismissal would result in compensation in the same circumstances as provided for in Wallace--that is, "where the employer engages in conduct during the course of dismissal that is 'unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive'". (27) Thus, while the majority's decision changes the underlying principle for awarding such damages, as well as the mechanism by which they are calculated and awarded, the Court suggests that the circumstances in which such damages will be awarded are not actually different from those in which damages would be awarded using the Wallace approach.

Turning to punitive damages, the majority rejected the idea that discriminatory conduct can constitute an independent actionable wrong in this context, instead reaffirming the holding of Bhadauria that the Human Rights Code represents a comprehensive scheme for dealing with discrimination. (28)

Having rejected discrimination as a basis for awarding punitive damages, the majority then considered whether an award of punitive damages could be justified on some other basis. The majority held that the trial judge had made palpable and overriding errors in his assessment that Honda's conduct was sufficiently harsh or vindictive to merit an award of punitive damages. The majority did concede that Honda's managers acted egregiously when they "told Keays that hiring outside counsel was a mistake and that it would make things worse". (29) The Court also recognized that "[t]his was surely a way of undermining the advice of the lawyer" and that "[t]his conduct was ill-advised and unnecessarily harsh". (30) Yet, the majority held that this alone did not form a sufficient basis for an award of punitive damages.

In dissent, LeBel J. took a very different approach to evaluating the mental distress and punitive damages claims. He first considered the majority's conclusion that the trial judge had made palpable and overriding errors with respect to the claim for damages for the manner of dismissal. On his review of the evidence, he concluded that there was indeed evidence that Honda had acted in bad faith. Specifically, LeBel J. held that there was sufficient evidence for the trial judge to find that Keays was being "set-up" when Honda insisted that he meet with Dr. Brennan and that the cancellation of Keays' accommodation was a reprisal for having retained outside counsel. (31)

In terms of the legal principles underlying damage awards for wrongful dismissal, LeBel J. did not explain his reasoning as thoroughly as Bastarache J. did in his majority judgment. Nonetheless, it appears that LeBel J. adhered to the Wallace approach to determining when damages should be awarded for the manner of dismissal, despite purporting to endorse Bastarache's decision as "a necessary and welcome restatement of the law on damages for wrongful dismissal". (32) Although he mentioned the principle of reasonable foreseeability, LeBel J. emphasized that damages for mental distress in this context flow from the employer's "obligation of good faith and fair dealing when dismiss[ing] employees". (33) Indeed, LeBel J. explicitly stated that "la] failure to show good faith may therefore justify an award of compensatory damages". (34) Justice LeBel's adherence to the Wallace approach is also evident in his approach to calculating damages, in that he approved of the increase of the notice period from 15 to 24 months as an appropriate measure of compensation in this context.

On the issue of punitive damages, LeBel J.'s statements were somewhat unclear. On the one hand, he indicated that he believed there was no basis for the award of punitive damages. (35) Yet, he appears to suggest--not explicitly, but implicitly--that discrimination might be an independently actionable wrong for which punitive damages could be awarded. Indeed, he noted that "the conduct at issue in Bhadauria was limited to the facts of that case" and that "[i]t was not necessary for this Court to preclude all common law actions based on all forms of discriminatory conduct". (36) He further opined that "[t]he development of tort law ought not to be frozen forever on the basis of this obiter dictum". (37) Unfortunately, LeBel J. provided no suggestion as to how he would sanction the development of the common law in this respect, and it is thus unclear whether he was merely agreeing with the lower courts in suggesting that discrimination could constitute an independent actionable wrong for an award of punitive damages or whether he would be willing to extend the common law even further--that is, to recognize a tort of discrimination.

III ASSESSING THE COURT'S DECISION

In this section I will critically examine and comment on three aspects of the Supreme Court's decision. First, I will examine the Court's decision to abandon what had come to be known as the Wallace approach, or Wallace damages. I will argue that numerous problems, both theoretical and practical, had emerged with Wallace damages, and that the Supreme Court was right to find some other mechanism of awarding damages for mental distress arising from wrongful dismissal.

Second, I will argue that while the Court was correct to abandon the Wallace approach, the principle of providing compensation for reasonably foreseeable losses does not actually provide a strong legal or normative basis for awarding this type of damages. Rather, I will argue that the Court's principle of awarding damages for bad faith or unfair conduct in the course of dismissal can be better understood as being legally grounded in an implied duty of good faith in the manner of termination, owed by the employer to the employee. It will also be argued that this rule can be normatively justified on the basis of economic efficiency.

Third, I will consider the Court's decision with respect to the claim for punitive damages. I will first argue that the majority was correct to reverse the lower court rulings and to hold that discrimination cannot be an independent actionable wrong giving rise to punitive damages. I will then argue, however, that punitive damages might have been justifiable on another basis--specifically, Honda's attempt to undermine the advice of Keays' lawyer.

Abandoning Wallace Damages

To address the Court's decision to reject Wallace damages--that is, an increase in the notice period as a form of indirect compensation for mental distress caused by an employer's bad faith or behaviour in a dismissal--I will briefly examine the Supreme Court's decision in Wallace. Then I will canvass the judicial treatment of Wallace damages and consider both the theoretical and practical reasons in support of the Court's rejection of this type of damages award.

Wallace v. United Grain Growers Ltd.: A New Head of Damages for Wrongful Dismissals

In Wallace, the Supreme Court considered the case of Jack Wallace, who had been dismissed without cause from a position at Public Press--which he had joined largely as a result of guarantees about his job security--where he had worked for 14 years. (38) As a result of his dismissal, as well as his employer's allegations that he was dismissed with cause, Wallace suffered significant emotional hardship for which he had to seek psychiatric attention. Wallace brought an action to recover wages in lieu of notice, as well as damages for mental distress. At trial, Wallace was awarded 24 months in wages in lieu of notice, as well as $15,000 in aggravated damages resulting from mental distress. The Manitoba Court of Appeal then lowered the notice period to 15 months and quashed the award of aggravated damages in its entirety.

In the Supreme Court, Iacobucci J., writing for the majority, refused to treat mental distress as an independent ground for recovery of damages. The majority affirmed the traditional rule that damages for mental distress could only be recovered in "peace of mind" contracts and held that this precluded an award of damages for mental distress per se in a wrongful dismissal case. (39)

The majority did, however, provide an indirect manner for providing damages for mental distress in this case. Specifically, Iacobucci J. held that "employers ought to be held to an obligation of good faith and fair dealing in the manner of dismissal, the breach of which will be compensated for by adding to the length of the notice period". (40) An increased notice period could thus be designed to compensate employees for "injuries such as humiliation, embarrassment and damage to one's sense of self-worth and self-esteem" that arise from bad faith conduct or unfair dealing in the course of dismissal. (41) On the facts of this case, Iacobucci J. restored the trial judge's 24-month notice period to compensate Wallace for the harm caused by the manner in which he was dismissed.

Following Wallace, it became quite commonplace for courts to provide this type of damages in wrongful dismissal cases. In an analysis of 98 cases in which courts awarded Wallace damages, Barry Fisher found that the average Wallace "bump-up" was 3.5 months, representing an average increase in the notice period of 43%. (42) Thus, the significance of Keays is that the Supreme Court of Canada rejected the Wallace "bump-up" approach in favour of compensating for reasonably foreseeable mental distress through an explicit award of damages.

Overruling Wallace: A Positive Change in the Law

There are a number of reasons in support of the Court's decision to abandon the Wallace "bump-up" approach in Keays. First, the principle established in Wallace obviously required revision following the Supreme Court's decision in Fidler, in which the Court decided that all reasonably foreseeable mental distress arising from a breach of contract was compensable in accordance with the principle in Hadley v. Baxendale. The decision of the majority in Wallace to compensate the plaintiff indirectly for mental distress through an increased notice period can be understood as an intermediate step between (1) the traditional approach of Addis v. Gramophone that prohibited recovery for any non-pecuniary loss in cases of wrongful dismissal, (43) and (2) the approach adopted nine years after Wallace by the Supreme Court in Fidler. While the Supreme Court in Wallace clearly wanted some mechanism for compensating wrongfully dismissed employees for the mental distress they suffered as a result of harsh or bad faith dismissals, (44) they were unwilling at that time to change the law so dramatically as to allow recovery for all reasonably foreseeable mental distress. The principle established in Wallace of compensating for such losses through an increased notice period can thus be understood as a mechanism for restricting recovery for mental distress only to cases of wrongful dismissal, as the award of an increased notice period could (by definition) be granted only in cases of wrongful dismissal. Nevertheless, after the Supreme Court decided in Fidler to allow recovery for all reasonably foreseeable mental distress flowing from a breach of contract, (45) the need for a special type of damages in the employment law context disappeared. Thus, the desire, at least implicit in Wallace, to restrict the expansion of the scope of recovery for mental distress to the employment context is no longer valid following Fidler, and this concern can no longer be used in principle to justify differential treatment of damages for mental distress in the employment context compared to other legal contexts.

Second, a number of practical problems emerged from the Supreme Court's decision in Wallace. First, some courts held they were precluded from providing Wallace damages where the operable notice period was fixed by statute (46) or by contract. (47) This was the case regardless of whether the Supreme Court, the legislature, or the parties themselves intended this result. Second, as Jamie Cassels and Elizabeth Adjin-Tettey have noted, because courts commonly determine the appropriate notice period by reference to the extensions granted in similar cases, individuals with high salaries would be awarded more damages than individuals with low salaries, regardless of whether their mental distress was equivalent. (48) Both of these outcomes are the arbitrary consequences' of this particular approach to awarding damages, and could be easily avoided with monetary compensation for mental distress.

Finally, significant theoretical confusion as to the nature and justification of Wallace damages surfaced in the lower courts. While some courts treated Wallace damages as compensatory damages, which would require proof that the employer's bad faith or unfair dealing caused the mental distress to the wrongfully dismissed employee, (49) other courts paid little attention to the harm caused, focusing instead on the wrongful conduct of the employer, thereby treating Wallace damages as a punitive measure designed to punish the employer for their conduct. (50) This confusion is not entirely unsurprising. (51) While the majority decision in Wallace did emphasize the compensatory nature of such damages. (52) elsewhere in the decision the majority seemed to suggest that the mere breach of the obligation of good faith and fair dealing in the manner of dismissal would by itself merit compensation by way of an increased notice period. (53)

This confusion required a clarification and restatement of the principles underlying Wallace damages. It also seems likely, however, that the Court's new approach in Keays will result in damage awards which more closely adhere to the underlying compensatory purpose of awarding such damages. An inquiry which is explicitly centered on assessing and trying to monetize the mental distress suffered by the plaintiff is less likely to become punitive in nature than an inquiry which centers primarily on the defendant's misconduct and awards damages through a seemingly arbitrary increase in the notice period. In other words, it seems likely the structure of the inquiry that courts undertake in explicitly awarding compensatory damages for mental distress is less susceptible to, if not entirely immune from, being influenced by punitive considerations; in particular, the new formulation corrects the lack of transparency associated with the "bump-up" in the notice period and instead explicitly connects the award both to the damage suffered by the plaintiff and to the defendant's wrongful conduct. (54)

Bearing this in mind, it seems likely that the Court's emphasis on compensation in Keays may have the effect of making damages for mental distress more difficult to recover. The ruling in Keays suggests that plaintiffs claiming damages for mental distress will be required to demonstrate more clearly the causal connection between the employer's bad faith and the mental distress suffered by employee than was required under the Wallace approach. (55)

This conservative approach may be justified, as it ensures that these damages actually serve the purpose that ought to underpin such damages awards--that is, ensuring that employees are properly compensated for harms caused by the harsh manner of their dismissal. This is not meant to suggest that egregious conduct during the course of wrongful dismissal should never also be punished; indeed, as discussed below, punitive damages may be available in wrongful dismissal cases to punish, deter, and denounce particularly egregious conduct. (56) Punitive considerations, however, should remain distinct from, and not be allowed to influence the calculation of, damages for mental distress, which are fundamentally compensatory in nature. Insofar as punitive damages are warranted in wrongful dismissal cases, they should be considered and justified in accordance with the principles outlined in Whiten. (57) This would help to ensure that supra-compensatory damages are not an arbitrary and unjustifiable windfall to plaintiffs, but rather are awarded only when they are fully considered by courts and found to be legally and normatively justifiable.

Justifying Damages for Mental Distress in Wrongful Dismissal Cases

The above section expressed support for the Supreme Court's decision to eliminate Wallace damages and instead to explicitly award compensatory damages for mental distress in wrongful dismissal cases; this discussion did not, however, address the soundness of the Hadley and Fidler principle of reasonable foreseeability as the appropriate basis for awarding damages for mental distress in wrongful dismissal cases. This section explicitly addresses this latter issue. This section argues that although the Supreme Court settled on the correct rule in Keays--that is, granting an explicit award of compensatory damages for mental distress caused by unfair or bad faith conduct during the course of the dismissal--this rule is not justifiable on the basis on which the Supreme Court sought to justify it, namely, the principle of reasonable foreseeability. Thus, this section first examines the weakness of this principle as a justification for this rule, and instead posits that it would make more sense to ground such damages in an implied duty of good faith in relation to the dismissal of employees. It then proposes that a normative basis for this rule can be found in considerations of economic efficiency.

The Mismatch Between the Principle of Reasonable Foreseeability and the Rule in Keays

To begin this discussion, it is necessary to clearly distinguish between two different causes of mental distress in the dismissal context. First, the mere fact of the loss of one's job can cause mental distress. Second, the manner of dismissal itself can also cause mental distress, when, for example, an employee is dismissed in an insensitive or callous manner. The Supreme Court in Keays clearly held that the first cause of mental distress--distress arising from the mere act of dismissal itself--is not compensable. (58) Rather, the Court held that only the second type--mental distress arising from bad faith or unfair conduct during the course of dismissal--is compensable. (59) For this rule to be justifiable under the principle in Hadley and Fidler, it must be the case that mental distress arising from bad faith or unfair conduct in the manner of dismissal was within the "reasonable contemplation of the parties at the time the contract was made", (60) while mental distress arising merely from the wrongful dismissal itself was not in the parties' reasonable contemplation.

It seems misleading, however, to suggest that mental distress is not a foreseeable consequence of dismissal itself. (61) As David Beatty has described, the social reality of the employment relationship is not simply one of a pure market exchange between a buyer and seller of labour; rather, one's employment is strongly associated with one's identity and one's "sense of worth in the community". (62) Given the feelings of self-worth, identity, and participation in a community that gainful employment engenders in the employed, it is not surprising that the loss of this employment could cause significant mental distress. Psychological research has in fact confirmed the notion that the loss of employment can be an exceptionally traumatic event which results in considerable mental distress. (63) Loss of one's employment can result in "increased depression, somatization and anxiety". (64) Indeed, research has been done on mechanisms for minimizing the mental distress and social dislocation that occurs following the loss of employment, (65) indicating that the mental distress which arises from unemployment is by no means a trivial problem. The Supreme Court has also acknowledged the hardship that accompanies ordinary dismissals. Justice Iacobucci, in his decision in Wallace, wrote that "the loss of one's job is always a traumatic event". (66)

If dismissal is always a traumatic event, then surely the trauma is reasonably foreseeable. A reasonable foreseeability test, then, would seem to imply the availability of damages to compensate for mental distress suffered because of the dismissal itself and not require bad faith or unfair conduct by the employer. Thus, the Hadley and Fidler principle of reasonable foreseeability does not provide an adequate explanation or justification for the rule articulated in Keays that only mental distress arising from bad faith or unfair conduct during the course of dismissal is compensable.

This does not mean that the rule articulated in Keays should be abandoned and damages should be available for all mental distress arising from an ordinary dismissal. Nonetheless, it does mean that such a rule requires some other justification. This section now argues that a legal justification for this rule can be found in an implied duty of good faith.

The Duty of Good Faith: A Stronger Legal Foundation

A legal principle underlying the rule articulated in Keays must be capable of differentiating between the two types of mental distress discussed above. As I have argued above, the principle of reasonable foreseeability seems rather ill-suited to serve as the basis for this distinction. Instead, I will argue that an implied duty of good faith in the manner of dismissal seems better able to justify this rule. Indeed, the idea that there exists some type of duty of good faith owed by an employer to an employee in the manner of dismissal was the basis for providing compensation for mental distress from the Court's decision in Wallace until its decision in Keays. In Wallace, both the majority and the dissent seemed open to the recognition of such a duty. While Iacobucci J. declined to hold that a breach of the duty of good faith in the manner of dismissal would give rise to an independent tort or breach of contract, (67) he nonetheless based much of his reasoning in establishing the Wallace "bump-up" on precisely such an obligation of good faith. (68) The dissent in Wallace went further and accepted an implied obligation of good faith in the manner of dismissal. (69) While not fully clarifying the nature of this duty, subsequent case law largely interpreted Wallace as creating some type of duty of good faith in the manner of dismissal. (70) This situation, however, became muddled in Keays, as the majority shied away from affirming such a duty or providing damages on the basis of the breach of such a duty. While the dissent in Keays viewed Wallace as creating precisely such an obligation, (71) the majority, having grounded its award of damages in the Fidler principle of reasonable foreseeability, declined to undertake any analysis of the nature or scope of an implied duty of good faith in this context. (72)

While I have argued that the Court in Keays was correct to reject the Wallace "bump-up" approach to compensating for mental distress, I posit here that the Supreme Court was incorrect to reject an implied duty of good faith as the legal basis for making these damages awards. Indeed, the good faith principle in Wallace actually corresponds with the way these damages are described in Keays, whereas the forseeability principle--which the Court adopts as their basis in Keays--does not. If the distinguishing feature in Keays between compensable and non-compensable mental distress is the presence of bad faith by the employer in the manner of dismissal, then it seems reasonable to view this rule as effectively imposing a duty of good faith on employers in the manner of dismissing employees. Thus, rather than justifying compensation circuitously through the principle of reasonable foreseeability, it seems more defensible to explicitly recognize a duty of good faith in such circumstances, since the circumstances under which such a duty would be breached correspond directly to the circumstances under which the Supreme Court has indicated that damages should be awarded. Whatever we call this type of damages, the obligation is in essence an obligation of good faith, because it is when this obligation is breached that damages have to be paid. These considerations suggest that, in its desire to reject the Wallace approach to providing recovery for bad faith in the course of a dismissal, the Supreme Court might have gone too far in rejecting a duty of good faith as a basis for such damages.

A Normative Justification for the Duty of Good Faith and the Rule in Keays

Although this comment has argued in favour of a particular legal principle for the rule articulated in Keays, no normative justification has yet been provided for that rule. Without such a normative justification, it could be argued that the rule in Keays should be modified such that all mental distress arising from a wrongful dismissal should be compensable in accordance with principle of reasonable forseeability described in the above account. This comment now proceeds to reject this critique and instead argues that the rule in Keays is normatively justifiable on grounds of economic efficiency.

An economic justification for the rule in Keays begins with the recognition that dismissals result in significant mental distress and social dislocation to the employee. While the ability of either party to terminate an employment contract at relatively low cost reduces frictions in the labour market and thereby contributes to its efficient operation, (73) an overall welfare or efficiency analysis of labour markets also requires acknowledgment of the harm that dismissed employees suffer--as a result of the layoffs--that the operation of an efficient labour market necessarily entails. Having recognized the existence of such harm, the issue becomes one of determining who should bear the cost of it. The question that an economic analysis poses in order to make this determination is: who is able to avoid causing the harm at lower cost, the employer or the employee? (74) If employers are able to prevent a particular type of harm to employees at significantly lower cost than it would cost employees to prevent that harm themselves, then employers should be made liable for that type of harm in order to provide them with an incentive to take the requisite steps to avoid that harm, and vice versa. In this particular case, the question becomes whether employers or employees are best able to prevent the significant mental distress that can result from dismissal. (75) To the extent that relatively easy steps are within the exclusive power of one party or the other to take to prevent mental distress, the law should provide incentives for parties to take those particular steps.

The first type of mental distress discussed above can only be prevented by the employer at very high cost. Because this type of mental distress arises from the mere fact of the dismissal, the only step which is open to the employer but not the employee to prevent this type of mental distress is to not dismiss the employee. A rule which prevents the dismissal of employees would obviously significantly increase labour market frictions and would impose significant costs on firms who no longer require the services of a particular employee. Thus, with respect to the mental distress arising simply from the fact of dismissal, neither party is able to cause that mental distress to be avoided particularly cheaply or easily. Since neither party can cause such harm to be avoided cheaply, other considerations--such as the efficiency and welfare benefits of having flexible labour markets--may come into play to justify limiting recovery for such damages.

In contrast, the employer is particularly well-positioned to prevent the second type of mental distress from occurring--that is, the mental distress arising from harsh conduct in the course of dismissal. The cost of such mental distress is likely better borne by the employer, as it is likely significantly easier for an employer to not act unfairly or in bad faith while firing someone than it is for an employee to recover from the psychological trauma which can accompany the loss of one's job. (76) Efficiency considerations therefore suggest that the employer should bear the cost of any mental distress arising from harsh conduct in the course of dismissal, as the employer appears to be the cheaper cost avoider. Thus, the rule in Keays--that mental distress is compensable where it arises from bad faith or unfair conduct in the manner of dismissal--can be understood and explained on the basis of efficiency considerations. (77)

One might reasonably ask whether the underlying justification of the rule in Keays matters or whether the above discussion critiquing the use of the reasonable foreseeability principle to justify the rule was a purely academic exercise. That is, if the Supreme Court arrived at a normatively justifiable rule for compensation for mental distress in wrongful dismissal cases, does the underlying justification or legal principle actually matter in any practical sense? Even leaving aside any inherent value in coherence between general legal principles and particular legal rules, there remains merit in justifying the rule in Keays on a duty of good faith rather than on the notion of reasonable foreseeability. If this rule is understood to be an application of the Hadley principle of reasonable foreseeability, this may actually distort our courts' understandings of the notion of reasonable foreseeability of mental distress in legal situations beyond the wrongful dismissal context. If courts continue to hold that the distress arising from the wrongful dismissal itself is not reasonably foreseeable, this may have the effect of raising the bar in cases where mental distress is reasonably foreseeable, in turn constraining the recovery of such damages to a much greater extent than is intended under this principle.

Punitive Damages

The final issue this comment will address is the Supreme Court's decision not to award punitive damages to Keays. This comment will not engage with the academic debate on the availability of punitive damages in private law generally or for breach of contract specifically; while interesting and important, these questions are beyond the scope of this comment and have already been explored at length elsewhere. (78) Rather, I will focus more specifically on whether an award of punitive damages was justified on the facts of this case. I will first argue that the Supreme Court was correct to hold that discrimination cannot be an independent actionable wrong for which punitive damages can be awarded. Nonetheless, I will also argue that the Supreme Court might have been justified in upholding the punitive damages award on other grounds; specifically, this comment will argue that the Court could have upheld the award of punitive damages on the basis of Honda's attempt to dissuade Keays from seeking or listening to legal advice.

Without delving too deeply into the broader issues relating to punitive damages, some background is necessary to understand the significance of Keays as well as the argument presented in this comment. The leading case on punitive damages in Canada is Whiten v. Pilot Insurance Co. (79) There the Court held that the "the general objectives of punitive damages are punishment (in the sense of retribution), deterrence of the wrongdoer and others, and denunciation"; additionally, any award of punitive damages must be "rationally related to the objectives for which the punitive damages are awarded". (80) While noting that "the incantation of time-honoured pejoratives ('high-handed', 'oppressive', 'vindictive' ... etc.) provides insufficient guidance (or discipline) to the judge or jury setting the amount", the Court held that use of such terms provides a vocabulary for characterizing the circumstances which merit punitive damages awards. (81)

In actions for breach of contract, there is an additional requirement for the availability of punitive damages. In addition to the defendant's conduct "depart[ing] markedly from ordinary standards of decency" through its egregiousness, it must also be independently actionable. (82) This actionable wrong need not amount to an independent tort. (83) Rather, the independent actionable wrong "can be found in breach of a distinct and separate contractual provision or other duty such as a fiduciary obligation". (84)

The question which the Supreme Court considered in Keays was whether, in an action for breach of contract, discrimination could constitute an independent actionable wrong for which punitive damages could be awarded. Contrary to the lower courts in Keays, (85) as well as decisions by courts, in other cases, (86) the Supreme Court in Keays held that "the [Human Rights] Code provides a comprehensive scheme for the treatment of claims of discrimination and [the Supreme Court's earlier decision in] Bhadauria established that a breach of the Code cannot constitute an actionable wrong". (87) Thus, the Supreme Court held that discrimination could not form the basis for a punitive damages claim in an action for breach of contract.

This conclusion seems reasonable. The reasoning of the Supreme Court in Bhadauria to the effect that the Human Rights Code constitutes a comprehensive enforcement scheme for remedying human rights violations applies in this case as well. (88) Sections 46.1(1) and (2) of the Ontario Human Rights Code specify that a court may, in a civil proceeding, award as a remedy either compensatory damages or non-monetary restitution "for injury to dignity, feelings, and self-respect" suffered by a party to the proceeding who has had their rights under Part I of the Code infringed by another party to the proceeding, provided that the proceeding was not commenced based solely on an infringement of a right under the Code. (89) Where the legislature has clearly spelled out the monetary remedies that civil courts are permitted to award for rights violations, and has limited these remedies to compensatory or restitutionary remedies, it stands to reason that the legislature was excluding the availability of other types of damages, such as punitive damages. This conclusion is supported by a plain reading of s. 46.2(1) of the Code, which indicates that the contravention of certain provision of the Code is an offence which can be punished with tines of up to $25,000. (90) This indicates that the legislature considered and indeed made provision for the availability of punitive measures in response to particular contraventions of the Code, underscoring the notion that the other punitive measures, such as punitive damages, should not be available generally.

One challenge to this position, advanced by the Ontario Court of Appeal in Keays, but not considered in the reasons of the Supreme Court, merits consideration. The Ontario Court of Appeal reasoned that, because the potential for attracting criminal liability for particular conduct does not preclude an award of punitive damages in civil court for that same conduct, by analogy, "the prosecution provisions under the Code do not preclude punitive damages". (91) Nevertheless, there are three responses to this argument. First, as the Supreme Court noted in Whiten, where criminal sanctions are available, "punitive damages should be resorted to only in exceptional cases", (92) thereby somewhat weakening, though obviously not completely negating, the Court of Appeal's argument that criminal provisions do not preclude punitive damages. Second, the Ontario Court of Appeal's analogy between criminal sanctions and the prosecution provisions in the Human Rights Code ignores the fact that, unlike the Criminal Code, the Human Rights Code also provides for non-criminal proceedings before the Tribunal for rectifying rights violations. (93) Thus, while it may be the case that the prosecution provisions of the Code might not by themselves preclude an award of punitive damages, the broader availability of statutory remedies in the case of human rights violations lessens the need for courts to turn to common law principles to award such remedies. Finally, it should be noted that the Code was amended between the decisions of the Ontario Court of Appeal and the Supreme Court of Canada in Keays to allow for compensatory and restitutionary remedies in civil proceedings, as discussed. (94) Thus, even if it were conceded that the remedies available through the Tribunal or through criminal proceedings did not constitute a comprehensive enforcement scheme prior to this amendment, due to the lack of any provision dealing with enforcement in civil courts, the subsequent inclusion of provisions dealing with civil remedies demonstrates a legislative intent that the Code be a comprehensive scheme for the treatment of discrimination.

Beyond these purely legal Considerations, there are practical reasons for not allowing discrimination to be an independent actionable wrong constituting the basis of a claim for punitive damages. Allowing individuals to claim punitive damages in civil courts in response to discrimination provides an incentive for individuals to resolve human rights disputes through courts rather than through the Human Rights Tribunal, which could thereby undermine the operation of the latter. (95) Moreover, such a rule would mean that punitive damages could potentially be recovered when a claim of discrimination is coupled with another claim, but not on the basis of discriminatory conduct alone. Aside from being an arbitrary result, this could create perverse incentives, such as causing individuals suffering from discrimination to hold on to their claims in the hopes that the rights-infringing party wrongs them in some additional way instead of attempting to resolve such claims quickly. Thus, strong legal and practical reasons support the Supreme Court's decision to rule that discrimination contrary to the Human Rights Code is not an independently actionably wrong for which punitive damages can be recovered.

While the Supreme Court correctly rejected discrimination as an independent basis for the award of punitive damages, this comment now briefly argues that the Supreme Court should not have been so quick to reject an alternative basis for an award of punitive damages--namely, Honda's attempts both to discourage Keays from using a lawyer and to undermine that lawyer's advice. Awarding punitive damages to punish such conduct seems normatively defensible. In employment cases, where there often exists a significant power imbalance between the two parties, (96) such conduct might cause an employee to feel powerless and lead them to either abandon legitimate claims against their employers or settle those claims at a fraction of their legal entitlement. In cases where employers take steps to impede their employees from asserting their rights, punitive damages may be a justifiable remedy for two reasons. (97) First, and most obviously, to the extent that society values empowering employees to assert their rights and receive what is legally owed to them, the law ought to deter employers from interfering in this process and punish them when they do so. Thus, punitive damages may be a necessary remedy for courts to employ in some cases in order to ensure that individuals generally are able to meaningfully exercise their rights. Second, punitive damages may also be justifiable in these circumstances on efficiency grounds. Where a defendant is sometimes able to avoid having to pay full compensation for the wrong which they cause to the plaintiff, simply forcing the defendant to pay compensatory damages does not cause the defendant to fully internalize the cost of their harmful conduct, and this can lead to socially inefficient decision-making on the part of the defendant. (98)

While there appears to be a strong normative basis for awarding punitive damages in such cases, the legal basis for awarding such damages is admittedly less clear, as it is not evident that there is an independent actionable wrong which can ground a claim for punitive damages on the facts of this case. (99) On the one hand, it could be argued that a breach of a duty of good faith by Honda could ground an award of punitive damages. Support for awarding punitive damages in these circumstances can be found in the Supreme Court's decision in Whiten, in which the breach of an implied duty of good faith in an insurance contract was held to be an independent actionable wrong for which punitive damages were awarded. (100) Importantly, the fact that the defendant in Whiten had engaged in bad faith conduct through which it "clearly hoped to starve the [plaintiff] into a cheap settlement" loomed large in the Supreme Court's decision to uphold an award of punitive damages. (101) It could analogously be argued that the attempt by Honda to dissuade Keays from speaking to his lawyer constituted a breach of good faith in the manner of Keays' dismissal. Admittedly, this reasoning may not be transferable to the employment context because, as noted in the previous section, the Supreme Court in Keays was exceptionally unclear as to the existence or nature of such an obligation in relation to the manner of dismissal. (102) Additionally, it is by no means immediately apparent that attempting to dissuade an individual from speaking to their counsel could by itself constitute a breach of good faith. (103) Nevertheless, neither of these considerations obviously precludes finding an independent actionable wrong in these circumstances. The normative considerations addressed above suggest that courts should at least consider legal mechanisms for making an award of punitive damages in these circumstances.

IV CONCLUSION

This comment has explored and critiqued a number of aspects of the Supreme Court's decision in Honda Canada Inc. v. Keays. In many important respects, the Supreme Court's decision was a welcome clarification and modification in the law of remedies for wrongful dismissal. With respect to both the abolition of Wallace damages as a distinct type of damages and the conclusion that punitive damages cannot be awarded for discrimination, this comment has argued that the Supreme Court's decision is justifiable from both theoretical and practical standpoints.

This comment has also suggested, however, that certain aspects of this decision might have unduly restricted the availability of certain remedies. With respect to damages for mental distress, this comment has argued that by awkwardly trying to fold damages for mental distress caused by unfair or bad faith conduct in the manner of dismissal into the principle of reasonable foreseeability of Hadley and Fidler, the Court has not only provided a weak basis for such damages, but it may also have unduly restricted the availability of damages for mental distress beyond the employment context. Similarly, this comment has also argued that the Supreme Court was too quick to reject Honda's attempt to persuade Keays not to consult a lawyer as a basis for an award of punitive damages. Thus, with respect to both types of damages, while the Supreme Court may have been justified in embracing a slightly more conservative approach, this comment suggests that Keays may have gone too far in this direction and that it may ultimately restrict the availability of these damages in future cases where such damages are indeed justified.

* The author gratefully acknowledges the assistance of the Senior Board Notes, Comments and Reviews Editors, in particular Lead Researcher Dana Lord, and the Senior Editors of the University of Toronto Faculty of Law Review.

(1) Honda Canada Inc. v. Keays, 2008 SCC 39, 66 C.C.E.L. (3d) 159 [Keays, SCC].

(2) Wallace v. United Grain Growers Ltd., [1997] 3 S.C.R. 701 at para. 7 [Wallace].

(3) Hadley v. Baxendale (1854), 9 Ex. 341, 156 E.R. 145 [Hadley].

(4) Whiten v. Pilot Insurance Co., 2002 SCC 18, 20 B.L.R. (3d) 165 at para. 79 [Whiten]. See also Keays, SCC, supra note 1 at paras. 62, 68.

(5) Keays v. Honda Canada Inc. (2005), 40 C.C.E.L. (3d) 258 at para. 32 (Ont. Sup. Ct.) [Keays, Sup. Ct.].

(6) Ibid. at para. 39; Bardal v. Globe & Mail Ltd., [1960] O.W.N. 253, 24 D.L.R. (2d) 140 [Bardal]: "The reasonableness of the notice must be decided with reference to each particular case, having regard to the character of the employment, the length of service of the servant, the age of the servant, and the availability of similar employment, having regard to the experience, training and qualifications of the servant." As Barry Fisher writes, "The classic Bardal factors continue to be cited and referred to in most cases where the judge is deciding notice." Barry B. Fisher, "Revisiting Reasonable Notice Periods in Wrongful Dismissal Cases--2006 Edition" (2006) 53 C.C.E.L. (3d) 60 [Fisher, 2006], online: <http://www.lawyersite.ca/lawyers/barryfisher/papers/ Revisiting_Reasonable_Notice.htm>.

(7) Wallace, supra note 2.

(8) Keays, Sup. Ct., supra note 5 at paras. 44-48.

(9) Ibid. at paras. 43, 45, 47.

(10) Ibid.; Seneca College v. Bhadauria, [1981] 2 S.C.R. 181 [Bhadauria[. Bhadauria will be discussed at greater length below in the section dealing with the Supreme Court's reasoning in relation to punitive damages.

(11) Keays, Sup. Ct., ibid.

(12) Ibid. at para. 53.

(13) Whiten, supra note 4. The Court in Whiten summarized the principles governing punitive damages in the following manner at para. 94: (1) Punitive damages are very much the exception rather than the rule, (2) imposed only if there has been high-handed, malicious, arbitrary or highly reprehensible misconduct that departs to a marked degree from ordinary standards of decent behaviour. (3) Where they are awarded, punitive damages should be assessed in an amount reasonably proportionate to such factors as the harm caused, the degree of the misconduct, the relative vulnerability of the plaintiff and any advantage or profit gained by the defendant, (4) having regard to any other tines or penalties suffered by the defendant for the misconduct in question. (5) Punitive damages are generally given only where the misconduct would otherwise be unpunished or where other penalties are or are likely to be inadequate to achieve the objectives of retribution, deterrence and denunciation. (6) Their purpose is not to compensate the plaintiff, but (7) to give a defendant his or her just desert (retribution), to deter the defendant and others from similar misconduct in the future (deterrence), and to mark the community's collective condemnation (denunciation) of what has happened. (8) Punitive damages are awarded only where compensatory damages, which to some extent are punitive, are insufficient to accomplish these objectives, and (9) they are given in an amount that is no greater than necessary to rationally accomplish their purpose. (10) While normally the state would be the recipient of any fine or penalty for misconduct, the plaintiff will keep punitive damages as a "windfall" in addition to compensatory damages. (11) Judges and juries in our system have usually found that moderate awards of punitive damages, which inevitably carry a stigma in the broader community, are generally sufficient.

Additionally, the Court in Whiten held that for punitive damages to be awarded in a case involving a breach of contract, there must also be an independent actionable wrong in addition to the breach of contract itself. Whiten, para. 78.

(14) Keays, Sup. Ct., supra note 5 at para. 60.

(15) Keays v. Honda Canada Inc. (2006), 52 C.C.E.L. (3d) 165, 274 D.L.R. (4th) 107 (Ont. C.A.) [Keays, C.A.].

(16) Ibid. at paras. 45-48.

(17) Ibid. at para. 66.

(18) Ibid. at paras. 94-101.

(19) Ibid. at para. 103.

(20) Honda did not appeal the finding of wrongful dismissal, but rather argued that the notice period should only have been eight to ten instead of fifteen months. See Keays, SCC, supra note 1 at para. 26.

(21) Ibid. at para. 26.

(22) Ibid. at para. 32.

(23) Ibid. at paras. 33-48.

(24) Ibid.; Fidler v. Sun Life Assurance Co. of Canada, 2006 SCC 30, [2006] B.C.W.L.D. 3945 [Fidler].

(25) Keays, SCC, ibid. at para. 59.

(26) Ibid. at para. 56.

(27) Ibid. at para. 57. See also the Supreme Court's statement at para. 59: "Examples of conduct in dismissal resulting in compensable damages are attacking the employee's reputation by declarations made at the time of dismissal, misrepresentation regarding the reason for the decision, or dismissal meant to deprive the employee of a pension benefit or other right, permanent status for instance." See also the examples in Wallace, supra note 2 at paras. 99-100.

(28) Additionally, the majority held that even if discrimination were a legally recognizable independent actionable wrong, the case for punitive damages would still not be made out on the facts, as it had not been made established that Keays did in fact suffer discrimination contrary to the Human Rights Code. Keays, SCC, ibid. at paras. 36-48.

(29) Ibid. at para. 77.

(30) Ibid.

(31) Ibid. at paras. 70-85. Note that there is a numbering error in the decision. The final paragraph of the majority's decision is para. 80, but the first paragraph of Lebel J.'s decision is para. 54. The numbering system employed in this paper uses this incorrect number system. It should be clear from the context whether the majority or dissenting judgment is being referred to by the citation.

(32) Ibid. at para. 87.

(33) Ibid.

(34) Ibid.

(35) Ibid. at para. 54.

(36) Ibid. at para. 91.

(37) Ibid. at para. 92. The obiter dictum to which LeBel J. is referring is Laskin C.J.'s statement in Bhadauria that "not only does the Code foreclose any civil action based directly upon a breach thereof but it also excludes any common law action based on an invocation of the public policy expressed in the Code". Bhadauria, supra note 10.

(38) Wallace, supra note 2.

(39) Ibid. at paras. 73-74. "Peace of mind" contracts refer to those contracts--such as a contract for a vacation--which are entered into for the purpose of providing peace of mind to one of the contracting parties, as opposed to contracts entered into for purely for commercial reasons. For a general overview of the traditional approach of Canadian contract law to damages for mental distress, see Stephen M. Waddams, The Law of Contracts, 5th ed. (Toronto: Canada Law Book Inc., 2005) at 538-43.

(40) Wallace, ibid. at para. 95.

(41) Ibid. at para. 103.

(42) Fisher, 2006, supra note 6.

(43.) Addis v. Gramophone Co., [1909] A.C. 488 (H.L.) [Addis]. The traditional position was confirmed by the Supreme Court of Canada in Peso Silver Mines Ltd. (N.P.L.) v. Cropper, [1966] S.C.R. 673. The Supreme Court's decision in Vorvis v. Insurance Corporation of British Columbia, [1989] 1 S.C.R. 1085 [Vorvis], can be seen as another step in the progression from Addis to Fidler. In Vorvis, the Supreme Court refused to award any aggravated damages arising from the wrongful dismissal, but it did suggest that aggravated damages could be awarded in some cases of wrongful dismissal, "particularly where the acts complained of were also independently actionable".

(44) See the discussions in Wallace, supra note 2 at paras. 90-95, where the court provides reasons to compensate for mental distress in these circumstances. The justifications given by Iacobucci J.--which "set [the contract of employment] apart from the ordinary commercial contract"--clearly evince an intention to restrict such compensation to the employment context.

(45) Fidler, supra note 24.

(46) See e.g. Jalan v. Institute of Indigenous Government, 2005 BCSC 590, 138 A.C.W.S. (3d) 1089 at para. 85.

(47) See e.g. Barnard v. Testori Americas Corp., 2001 PESCAD 4, 107 A.C.W.S. (3d) 619; Lane v. Nanaimo-Ladysmith School District No. 68, 2006 BCSC 129, 47 C.C.E.L. (3d) 219 at para. 188; but see Duprey v. Seanix Technology (Canada) Inc. 2002 BCSC 1335, 20 C.C.E.L. (3d) 136 [Duprey].

(48) Jamie Cassels and Elizabeth Adjin-Tettey, Remedies: the Law o[Damages, 2d ed. (Toronto: Irwin Law, 2008) at 242.

(49) For examples of decisions taking the compensatory approach and requiring a showing of mental distress to the employee that was caused by bad faith conduct, see Prinzo v. Baycrest Centre for Geriatric Care (2002), 17 C.C.E.L. (3d) 207, 215 D.L.R. (4th) 31 at paras. 65-72 [Prinzo]; Jessen v. CHC Helicopters International Inc., 2006 NSCA 81, 271 D.L.R. (4th) 659 at para. 30.

(50) For examples of decisions focusing exclusively or primarily on the employer's bad faith conduct with no or only minimal judicial attention addressed to the mental distress suffered by the plaintiff, see Duprey, supra note 47 (bumping up the notice period by one month as a result of a bad faith dismissal without suggestion anywhere in the reasons that the plaintiff suffered any mental distress); Lowndes v. Summit Ford Sales (2006), 47 C.C.E.L. (3d) 198 (Ont. C.A.) (upholding an award of Wallace damages made by the trial court on the basis of a number of factual findings regarding the existence of bad faith but without any specific findings that this bad faith actually caused the plaintiff any mental distress); Squires v. Corner Brook Pulp & Paper Ltd. (1999), 44 C.C.E.L. (2d) 246, 175 Nfld. & P.E.I.R. 202 at paras. 84-86 (Nfld. C.A.) (awarding a six month Wallace bump-up on account of heavy-handed actions by the employer without any discussion whatsoever of mental distress); Silvester v. Lloyd's Register North America Inc., 2004 NSCA 17, 30 C.C.E.L. (3d) 200 at para. 18 ("it is clear from the above passages that the employee need not establish that the bad faith in the dismissal impaired his or her future employability, or that there be corroborative evidence of mental distress"); Chabot v. William Roper Hull Child & Family Services, 2003 ABQB 49, 119 A.C.W.S. (3d) 775 at para. 41; Schurman v. Covered Bridge Recreation Inc., 2008 NBQB 84, 164 A.C.W.S. (3d) 109 at paras. 26-27. Such decisions have led some commentators to remark that "all that is required, theoretically, [for an award of Wallace damages] is some form of bad faith conduct on the part of the employer in the manner of dismissal": Janice B. Payne & Ted J. Murphy, "Recent Developments Relating to the Awarding of Damages within an Employment Law Context: A Unifying Theory" in Special Lectures 2005; The Modern Law of Damages (Toronto: Irwin Law, 2006) 465 at 489.

(51) Indeed, this confusion led the majority in Keays to remark that "the confusion between damages for conduct in dismissal and punitive damages is unsurprising, given that both have to do with conduct at the time of dismissal". Keays, SCC, supra note 1 at para. 60.

(52) See e.g. Wallace, supra note 2 at para. 104.

(53) Ibid. at paras. 88, 95.

(54) This emphasis on the compensatory purpose of such damages seemed to be a central aspect of the Supreme Court's reformulation of damages for mental distress in wrongful dismissal cases in Keays: "[I]f the employee can prove that the manner of dismissal caused mental distress that was in the contemplation of the contemplation of the parties, those damages will be awarded not through an arbitrary extension of the notice period, but through an award that reflects the actual damages." Keays, SCC, supra note 1 at para. 59.

(55) See the cases listed supra note 50.

(56) Whiten, supra note 4.

(57) Ibid. See also an elaboration of the Whiten principles, supra note 13.

(58) Keays, SCC, supra note I at para. 56. This aspect of the rule established by the court's decision in Keays is consistent with the decision in Wallace, in which the Court similarly required that an increase in the notice period would only be appropriate in the context of some type of bad faith or unfair conduct by the employer in the manner of dismissal.

(59) Ibid. at para. 57: "Damages resulting from the manner of dismissal must then be available only if they result from the circumstances described in Wallace, namely where the employer engages in conduct during the course of dismissal that is 'unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive'."

(60) Fidler, supra note 24 ar para. 44.

(61) This point has also been made by Judy Fudge. See Judy Fudge, "The Limits of Good Faith in the Employment Contract: From Addis to Vorvis to Wallace and Back Again?" (2006-07) 32 Queen's L.J. 529 at 569.

(62) David Beatty, "Labour is Not a Commodity" in Barry J. Reiter & John Swan, eds., Studies in Contract Law (Toronto: Butterworths, 1980) 313 at 324.

(63) See e.g. Andrew E. Clark & Andrew J. Oswald, "Unhappiness and Unemployment" (1994) 104 The Economic Journal 648; Margaret W. Linn, Richard Sandifer & Shayna Stein, "Effects of Unemployment on Mental and Physical Health" (1985) 75 American Journal of Public Health 502; Richard M. Cohn, "The Effect of Employment Status Change on Self-Attitudes" (1978) 41 Social Psychology 81. Interestingly, Clark & Oswald find that "people who have been unemployed a long time show less distress than those who have recently lost their jobs", suggesting that mental distress immediately after the loss of one's employment should be particularly foreseeable.

(64) Linn et al., ibid. at 503.

(65) See e.g. Amiram D. Vinokur, Richard H. Price & Yaacov Schul, "Impact of the JOBS Intervention on Unemployed Workers Varying in Risk for Depression" (1995) 23 American Journal of Community Psychology 39; Stefanie S. Spera, Eric D. Bhurfiend & James W. Pennybaker, "Expressive Writing & Coping with Job Loss" (1994) 37 Academy of Management Journal 722.

(66) Wallace, supra note 2 at para. 95.

(67) Ibid. at paras. 77-78.

(68) Ibid. at para. 95: "In my opinion, to ensure that employees receive adequate protection, employers ought to be held to an obligation of good faith and fair dealing in the manner of dismissal, the breach of which will be compensated for by adding to the length of the notice period." See also ibid. at para. 98: "The obligation of good faith and fair dealing is incapable of precise definition. However, at a minimum, I believe that in the course of dismissal employers ought to be candid, reasonable, honest and forthright with their employees and should refrain from engaging in conduct that is unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive."

(69) The dissent, authored by McLachlin J. with L'Heureux-Dube and La Forest JJ. concurring, viewed Iacobucci J.'s decision as not explicitly recognizing such an obligation on employers and instead characterized the majority's decision as holding simply that "the manner of dismissal may be considered generally in defining the notice period for wrongful dismissal". Ibid. at para. 118. The dissent in Wallace then explicitly recognized the existence of "an implied duty of good faith in termination of the employment". Ibid. at para. 112. For academic commentary on the confusion in Wallace on the existence and nature of such an obligation, see Fudge, supra note 61 at 547-53. See also Stephen Waddams, "'Modern Notions of Commercial Reality and Justice': Justice Iacobucci and Contract Law" (2007) 57 U.T.L.J. 336-39 (suggesting that the dissent's approach in Wallace may have been preferable to the majority's approach).

(70) See e.g. McKinley v. BC Tel, 2001 SCC 38, [2001] 2 S.C.R. 161 at para. 73 [McKinley]. See also the cases listed supra note 50.

(71) Keays, SCC, supra note 1 at para. 114.

(72) Ibid. at para. 58.

(73) See generally Richard Posner, Economic Analysis of Law (New York: Aspen Publishers, 2003) at c. 11. For a broader defense of the contract at will in employment law, see Richard Epstein, "In Defense of the Contract at Will" (1984) 55 U. Chicago L. Rev. 1005.

(74) For an overview of this notion developed with reference to tort law, see Guido Calabresi, The Cost of Accidents (New Haven, CT: Yale University Press, 1970) at 73-75. A distinct argument, also stemming from the law and economics school, is that losses should be broadly spread amongst a large number of parties so that the full impact of a loss is not felt by one individual who might be particularly unable to bear it. See Calabresi, ibid. at c. 4. While this reasoning will not be explored at length here, it may provide a separate justification for why employers rather than employees should bear particular losses. The validity and implications of this separate line of reasoning are beyond the scope of this paper and will not be explored further.

(75) The most extreme neoclassical economists might argue, using Coasean reasoning, that the initial liability rule is irrelevant to this determination, as the individuals can negotiate to ensure that the employment contract contains the socially optimal provisions as between the two parties. This reasoning, however, ignores the numerous problems--such as transaction costs and various behavioural quirks--which often prevent parties from reaching socially optima| bargains. In such circumstances, the liability rule matters significantly. For the initial article which spawned this line of reasoning, see R.H. Coase, "The Problem of Social Cost" (1960) 3 J.L. & Econ. 1. For an excellent formulation of the Coase Theorem, including a list of all the assumptions which it requires, see Elizabeth Hoffman & Matthew Spitzer, "The Coase Theorem: Some Experimental Tests" (1982) 25 J.L. & Econ. 73 at 73. For an overview of the implications of behavioural economics for contract formation, see Russell Korobkin, "Behavioral Economics, Contract Formation, and Contract Law" in Cass Sunstein, ed., Behavioral Law & Economics (Cambridge: Cambridge University Press, 2000) 116; see also Russell Korobkin, "The Endowment Effect and Legal Rules" (2003) 97 NW. U. L. Rev. 1227. For an accessible empirical assessment of the failure of the Coase Theorem due to the existence of the endowment effect, see Daniel Kahneman, Jack L. Knetsch, & Richard Thaler, "Experimental Tests of the Endowment Effect and the Coase Theorem" in Cass Sunstein, ed., Behavioral Law & Economics (Cambridge: Cambridge University Press, 2000) 211.

(76) This is not to suggest that it is entirely costless for firms to ensure that their managers do not act in bad faith when firing employees. For example, such a rule may cause firms to expend resources to appropriately train managers to not engage in bad faith conduct in the course of dismissals. Given that firms, however, generally already provide training to managers--for example, to not discriminate against or sexually harass their employees--in order to minimize managerial conduct which could lead to certain types of liability, it seems unlikely that the marginal expense of this additional training would be very large, especially in comparison to the mental distress that such conduct can cause to employees.

(77) The above comments should not be viewed as arguing that efficiency considerations alone justify or explain the rules applicable to employment contracts, nor should they be construed to suggest that other considerations, such as fairness or human dignity, do not or should not play a substantial role in understanding and defining such rules. Rather, the above merely suggests the more limited conclusion that the particular rule in Keays can be better understood and normatively justified through efficiency considerations than it can be through the Hadley principle of compensation for reasonably foreseeable harms. For interesting discussions of the jurisprudential tensions between a rights paradigm and an efficiency paradigm in employment law, see Geoffrey England, "Recent Developments in the Law of the Employment Contract: Continuing Tension Between the Rights Paradigm and the Efficiency Paradigm" (1995) 20 Queen's L.J. 557. See also Payne & Murphy, supra note 50.

(78) For a critique of punitive damages for breach of contract, see John Swan, "Punitive Damages for Breach of Contract" A Remedy in Search of a Justification" (2004) 29 Queen's L.J. 596. The correctivist framework similarly rejects the use of punitive damages in private law; see generally Ernest Weinrib, The Idea of Private Law (Cambridge, MA: Harvard University Press, 1995) at 133-44. For a consideration of various rationales underlying punitive damages, see Bruce Chapman & Michael Trebilcock, "Punitive Damages: Divergence in Search of a Rationale" (1989) 40 Ala. L. Rev. 741.

(79) Whiten, supra note 4.

(80) Ibid. at paras. 68, 74.

(81) Ibid. See also Keays, SCC, supra note 1 at para. 68.

(82) Whiten supra note 4 at para. 79; Fidler, supra note 24 at para. 63; Vorvis, supra note 43; Keays, SCC, supra note 1.

(83) Whiten, ibid.

(84) Ibid. at para. 82. In Fidler, supra note 24 at para. 63, the Supreme Court held that a breach of the duty of good faith can in some cases satisfy this requirement: "Where the breach in question is a denial of insurance benefits, a breach by the insurer of the contractual duty to act in good faith will meet this requirement."

(85) Keays, Sup. Ct., supra note 5; Keays, C.A., supra note 15.

(86) See e.g. Gigliotti v. Masev Communications Inc., 2004 BCSC 85, 30 C.C.E.L. (3d) 114; Greenwood v. Ballard Power Services, 2004 BCSC 266, 129 A.C.W.S. (3d) 686. As the Ontario Court of Appeal noted in Keays, C.A., ibid., even the Supreme Court previously seemed to accept the principle that "discrimination may in turn give rise to a punitive damages award". See McKinley, supra note 70 at para. 89. For somewhat dated but nonetheless interesting academic commentary on the lower court decisions in McKinley and the general erosion of the Supreme Court's holding in Bhadauria, supra note 10, see Tamar Witelson, "Retort: Revisiting Bhadauria and the Supreme Court's Rejection of a Tort of Discrimination" (1990) 10 N.J.C.L. 149.

(87) Bhadauria, ibid.; Keays, SCC, supra note 1 at para. 65.

(88) Bhadauria, ibid.

(89) Human Rights Code, R.S.O. 1990 c. H-19, as am. by S.O. 2006, c. 30, ss. 46.1(1), 46.1(2) [Human Rights Code].

(90) Ibid. at s. 46.2(1).

(91) Keays, C.A., supra note 15 at para. 50.

(92) Whiten, supra note 4 at para. 69.

(93) See Human Rights Code, supra note 89, ss. 45(2)-(3). This was also the reasoning employed by the Supreme Court in Bhadauria, supra note 10.

(94) An Act to amend the Human Rights Code, S.O. 2006, c.30, amending R.S.O. 1990 c. H-19.

(95) This was a concern of at least one of the interveners, the Council of Canadians with Disabilities. See Keays, SCC, supra note 1 at para. 66.

(96) This power imbalance and employees' vulnerability was recognized by Iacobucci J. in his decision in Wallace. See Wallace, supra note 2 at paras. 92-95.

(97) For classic formulations of this argument, see Daniel A. Farber, "Reassessing the Economic Efficiency of Compensatory Damages for Breach of Contract" (1980) 66 Va. L. Rev. 1443; A. Mitchell Polinsky & Steven Shavell, "Punitive Damages: an Economic Analysis" (1998) 111 Harv. L. Rev. 869.

(98) See e.g. Steven Shavell, Foundations of Economic Analysis of Law (Cambridge, MA: Belknap Press of the Harvard University Press, 2004) at 244.

(99) Even if there is no independent actionable wrong, a departure from this requirement that there be an independent actionable wrong might be justifiable in these circumstances. Awarding punitive damages where an employer has tried to dissuade an employee from asserting their legal rights is arguably consistent with the underlying purpose of requiring an independent actionable wrong to justify an award of punitive damages for breach of contract. The requirement of an independent actionable wrong for awarding punitive damages can be seen as ensuring that individuals will not be punished for or deterred from mere breach of contract. This is consistent with other contractual rules--such as the principle that damages are the default remedy for breach of contract--that ensure that parties generally remain free to breach their contracts upon payment of proper compensation to the non-breaching party. While this general principle is sound, it does not preclude an award of punitive damages in circumstances such as this, where the award would be based not on the breach itself but rather on other conduct. Even if Honda's conduct is not actionable, there is still a wrong in these circumstances that is independent of the breach of contract and, as noted above, warrants deterrence and punishment.

(100) Whiten, supra note 4 at para. 131.

(101) Ibid. at para. 79.

(102) Keays, SCC, supra note 1 at para. 58. Additionally, some lower courts have held that a breach of good faith in the employment context is not an independent actionable wrong which can ground an award of punitive damages. See e.g. Prinzo, supra note 49 at para. 34; Brazeau v. I.B.E.W., 2004 BCSC 251, 129 A.C.W.S. (3d) 328 at para. 252, expressing, in obiter, "some doubt as to whether an award of punitive damages in the insurance context translates in a meaningful way to an employment contract'. The limited authority on this point, however, means that it is by no means certain that a breach of good faith in the manner of dismissal could not ground an award of punitive damages in some circumstances.

(103) A detailed examination of cases following Wallace has not revealed any cases in which courts have considered whether dissuading a terminated employee from seeking legal advice could constitute a breach of the duty of good faith. Thus, it remains an open question as to whether such conduct could constitute bad faith. The concept of good faith appears to be sufficiently malleable as to potentially require one party to not dissuade another from seeking legal advice. While comprehensive definitions of good faith are elusive, Black's Law Dictionary defines good faith in the following relatively broad language. "A state of mind consisting in (1) honesty in belief or purpose, (2) faithfulness to one's duty or obligation, (3) observance of reasonable commercial standards of fair dealing in a given trade or business, or (4) absence of intent to defraud or to seek unconscionable advantage." Black's Law Dictionary, 8th ed., s.v. "good faith". Seeking to dissuade a vulnerable party from consulting an attorney to enforce their legal rights could likely be argued to fit into the fourth of these categories. Beyond merely a breach of good faith, there are a few cases in which one party's attempt to undermine the other party's confidence in their attorney has been one factor which a court has taken into account in making an award of either punitive or aggravated damages. See Fleck v. Stewart (1991), 80 Alta. L.R. (2d) 334 at paras. 82-83 (Q.B.); Kaufman v. Weston Bakeries (1996), 18 C.C.E.L. (2d) 198 at paras. 16, 22 (Ont. C.J. Gen. Div.); Wilson v. Walczyk, 2003 WL 31654 at paras. 154-55 (Ont. Sup. Ct.). These cases provide limited direct support for the above argument, but they do suggest that courts are not entirely indifferent to attempts by one party to undermine their adversary's confidence in their lawyer.

PAUL-ERIK VEEL, B.A. (McGill), Third Year J.D./M.A. (Economics) Candidate (Toronto).
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