Unjust Dismissal Under Canada Labour Code

Remedy in Lieu of Reinstatement

Future Loss

The question arises as to what compensation, if any, should be ordered where reinstatement has been denied.

The Federal Court of Appeal in its 2023 decision noted that awards made in lieu of reinstatement are well within the powers of the adjudicator to fashion the remedy. 1 In the Amer decision, the adjudicator allowed for an award of severance pay under the Code as the compensation sum for the loss of reinstatement. The Court of Appeal agreed that this was reasonable and restored the award:

I therefore conclude that an adjudicator (or now the Board) may award statutory severance pay under the Code (or even greater amounts), in addition to damages for lost wages and benefits, where reinstatement is not awarded and it is appropriate to compensate for the loss of protection available under Division XIV of the Part III of the Code. Thus, an award of this nature is not, of itself, unreasonable.

The employer also took issue with the lack of reasons given to support this award, which the Court of Appeal found to have been insignificant.

This issue was reviewed in a recent Federal Court of Appeal decision. 2 The employee was successful in the adjudicative hearing. However, she was denied reinstatement and full arrears in income to the date of the hearing. The reason for the denial of reinstatement was due to the lack of remorse shown by the employee and her “self-justification for not complying with the employer’s workplace procedures”. The adjudicator found that he lacked confidence that the “behaviour and attitude” of the complainant would have remarkably changed, had she been reinstated. 3

Two Differing Views

As to the issue of compensation in lieu of reinstatement, the adjudicator had identified two possible approaches.

The first is the common law approach, which measures the likely damages for wrongful dismissal and then adjusts this to account, in addition, for the loss of the Code protections. This view accounts for the years of service to determine the fundamental sum of compensation, which has used a range of 1 to 1.5 months per year of service, which is then adjusted upwards for the loss of the security of the Code: 4

… The range is from one to one and half months per year of service, with the most common being one and a quarter months per year of service. Some decisions, such as Humber River, supra, address factors which may increase or decrease a grievor’s entitlement (see Para. 31 and 32 of Humber River, supra) while many decisions refer only to the grievor’s years of service. It is my view, at the very least, one must look to the grievor’s years of service, the position lost, the likeliness of re-employment, and specifically, the likeliness of re-employment in the same field in a unionized position. …

The second, known as the “fixed term” view, determines the likely earnings to be achieved over continued employment to retirement, and then discounts this sum for contingencies. These include the possibility of another dismissal, a change in the economic health of the employer, technological changes, employer insolvency to reach a final number.

This was the approach taken in a 2016 decision from the Federal Court of Appeal. 5 This view, distinct from a wrongful dismissal claim, takes the value of the salary and benefits which the employee would likely have earned, given reinstatement, reduces this sum by perceived contingencies which may have abbreviated continued employment and then sets the economic loss. One of such contingencies may include the likelihood of the employee obtaining alternate employment.

The Federal Court of Appeal noted that it is not the intent of the Court to chose which, in any, of these conflicting views is best, but rather to assess whether the chosen path is a reasonable one.

This latter approach was found to be too speculative by the adjudicator. He assessed the loss on this topic as 8 months to which he added a further 4 months for the loss of the Code’s protections. He also allowed costs of $68,000. He made no order of back pay, that is, he said nothing about back pay. On later inquiry, he stated that he did not order back pay intentionally.

The Court of Appeal reviewed the differing approaches on this issue and stated that either one meets the standard of reasonableness. It would thus be inappropriate for the reviewing court to intervene. 6

These differing approaches were also reviewed in a recent CIRB decision. 7

This case provides a good review of the manner of assessing compensation based on the “fixed term” approach. The terms used in this analysis differed from the above cases. The vocabulary for “fixed term” became “Economic Loss Model”.

In this review, the Board noted it should consider the age, tenure, position, current health issues, the projected time to retirement, the likelihood of a dismissal for cause, the chance of early retirement or a change in career. The purpose of this assessment is to determine the discount, if any, to be applied to the analysis.

An example was used of a similar review in which the adjudicator had assessed that, given past conduct, the employee would likely have been dismissed within 12 to 16 months of his expected return to work date. 8

In the instant case, the Board found it likely that the employee would have been terminated or quit within 12 months, based on the conduct displayed at the hearing. This became the compensation in lieu of reinstatement.

The Board has also noted that in this context, there is a distinction between the arbitral remedy and that of unjust dismissal. This is so regardless of the means used to assess the loss.

Arbitration Cases Distinguished

The Board observed in a January 2023 decision 9 that the circumstance of a union member offers more security and benefits than compared to the employee seeking an unjust dismissal remedy:

In addition, the Board is mindful that the loss of reinstatement has a different value for a unionized employee and a non-unionized employee claiming unjust dismissal under the Code. In determining unjust dismissal complaints, the Board can look to arbitral jurisprudence from the unionized sector for guidance on appropriate legal principles and concepts. However, the Board is of the view that these two contexts are not completely analogous. For example, when a unionized employee is not reinstated, in addition to the protection from dismissal without just cause, they also lose a series of negotiated benefits under the collective agreement. These benefits typically include seniority-based rights in layoffs, bumping, job postings and vacation selection. In addition, a unionized employee has the benefit of representation by a bargaining agent that is subject to a statutory duty of fair representation. A non-unionized employee, such as the complainant, does not experience the same range of losses in circumstances where they are not reinstated in employment. Therefore, the Board considers the assessment of damages in lieu of reinstatement to involve different contingencies for a unionized employee versus a non-unionized employee.

For this reason, arbitral precedents will need to be adjusted.