When a unionized employee is terminated for cause, an arbitrator may find the employer was justified in imposing discipline but may not agree that termination was appropriate. In these circumstances, it is common for the arbitrator to reinstate that employee (“grievor”) with back pay.
In “exceptional circumstances,” an employer can successfully argue that reinstatement is inappropriate, in which case an arbitrator can decide not to reinstate a grievor and instead award damages in lieu of reinstatement. This most commonly occurs when there is a breakdown of trust in the employment relationship, or where there is no chance reinstatement would be successful.
What are exceptional circumstances?
Reinstatement may be inappropriate when the employment relationship is no longer viable. To determine this, an arbitrator will consider the following non-exhaustive factors:
- Lack of trust between the grievor and employer
- The inability or refusal of the grievor to accept responsibility for wrongdoing
- The demeanor and attitude of the grievor at the hearing
- Animosity on the part of the grievor towards management or co-workers
- The refusal of co-workers to work with the grievor
- The risk of a “poisoned” atmosphere in the workplace1
Examples of an arbitrator denying reinstatement
In one arbitration award, a grievor was terminated from her employment at a French-language school because the school was dissatisfied with her French-language proficiency.2 While the arbitrator found termination unjust, he did not grant reinstatement because he found it would be impossible for the grievor to develop the French-language proficiency required for the role. As such, there was no purpose in reinstating her because doing so would ultimately lead to her employment being terminated again.
In another decision, an arbitrator declined to reinstate a grievor who made racial comments on Facebook because doing so could have had a significant detrimental effect on the company’s reputation and ability to conduct its business.3
In another decision, a grievor was terminated for insubordination involving a “heated confrontation” during which the grievor refused to move his company vehicle from an unauthorized parking spot until his manager paid him overtime. The arbitrator found the serious misconduct did not meet the “just cause” standard for termination but declined to grant reinstatement because the employment relationship was “so irretrievably damaged that it [could not] be resuscitated”.4
How will an arbitrator calculate damages in lieu of reinstatement?
There are two prevailing approaches to calculating damages in lieu of reinstatement. The Federal Court of Appeal recently found that both approaches are reasonable, so employers are not likely to receive further clarity from the courts any time soon.5
The two prevailing approaches are: (1) the length-of-service approach; and (2) the fixed-term approach.
Under the length-of-service approach, a grievor is generally awarded 1 to 1.5 months of pay per year of service. Sometimes, an additional 10-15% is added to represent other “fringe” benefits under a collective agreement. This is the more traditional approach still used by many arbitrators.6
Under the fixed-term approach, the arbitrator predicts what would have happened had the grievor not been terminated (e.g., would the grievor have worked until retirement, quit, or been terminated from employment at some later point). The employer is then required to pay out the remainder of that term of employment under the collective agreement. This is a more novel approach but has become more common.7 Under the fixed-term approach arbitrators have considered:
- The grievor’s employment history
- The grievor’s failure to respond to progressive discipline
- Whether the grievor had plans to return to higher education
- Whether the employer imposed or had plans to impose a layoff
- The likelihood the worksite might close or a technological change might render the position obsolete.
Pros and cons of each approach
If reinstatement is not the employer’s preference, it is important to consider which approach is best in terms of calculating damages. While the damages that arise from each approach can be similar, in some cases they are quite different – particularly if the grievor has either a very short or very long period of employment.
The advantage to the length-of-service approach is predictability. On the other hand, the fixed-term approach may be used to show that an otherwise large damage award should be reduced because the grievor was unlikely to continue working with the employer, regardless of the termination.
To learn more and for assistance, contact your Sherrard Kuzz LLP lawyer, or our firm at email@example.com.
1 DeHavilland Inc and CAW-Canada, Local 112 (Mayer) (Re), 1999 CanLII 35895 (ON LA)
2 Regional Authority of Greater North Central Francophone Education, Region No. 2 and CEP, Local 777 (Monterrosa), Re (2012), 223 LAC (4th) 135
3Wasaya Airways LP v ALPA (2010), 195 LAC (4th) 1
4 NAV Canada and I.B.E.W., Local 2228 (Coulter) (Re), 2004 CanLII 94784 (CA LA)
5Hussey v Bell Mobility Inc., 2022 FCA 95
6 See, for example, Ontario Public Service Employees’ Union, Local 529 v Toronto Community Housing Corporation, 2018 CanLII 85978 (ON LA)
7 See, for example, Hay River Health & Social Services Authority v PSAC (2010), 201 LAC (4th) 345