Yes, it can cause respiratory burns and pain, even in people, and we're MUCH larger than the chickens. I like the smell of cedar. Maybe mix 10% or less of cedar chips to reduce the burning oils in the air? Especially if you're in a winter climate where the birds will be enclosed with the fumes for days at a time?
Our birds (and one son) developed wheezes and swollen eyes but checked clean for respiratory illnesses like IB and gapeworm, etc. That was a little expensive to check out. Once the cedar chips were removed it was like magic, everybody was fine in a day or two.
Presently I have discovered that mixing overgrown mint from the garden into the pine chips smells nice, too. I don't currently use any cedar as I am certain our birds react to it. Along with their black feathers, I have just gotten used to the salt-n-pepper look of white pine chips mixed with dark green dried mint leaves and chicken poops as their coop litter.