I haven't seen any actual scientific evidence that shows definitively that cedar is harmful to chickens, but I'd still use it with caution. IMO if you can smell it, it needs to air out.
I do use some Western cedar chips, sourced from my own lot along with other woods, in both coop and run and have never seen signs of respiratory problems. Chips would be preferable to shavings as they have less surface area, so less of the aroma is being released. My chips are also well aged and no longer have much noticeable scent. I would avoid using all cedar, or fresh cedar, or large amounts of cedar in closed-in environments (i.e. indoor brooder, coop lacking in ventilation). My coop has 3x the recommended ventilation plus has a high ceiling for added air volume.