Discharge without just cause: Reinstatement or damages?

In labour arbitrations, remedies other than reinstatement are becoming more common when employment relationship is damaged

Alternatives to reinstatement

Reinstatement is one of the remedies arbitrators can consider as a resolution to a successful grievance in a unionized environment. However, sometimes the employment relationship is no longer viable due to the actions of the employee or the nature of the dispute, which makes reinstatement an undesirable solution.

Arbitrators are becoming more willing to consider creative remedies other than simply reinstatement, even where just cause for termination cannot be established. Damages may be an alternative remedy, but how can employers know what to expect?

Reinstatement is viewed as the ideal “make whole” remedy for the unlawfully dismissed employee, but is not normally available through the courts.

Legislated exceptions to this do exist, such as:

•Special cases of unlawful termination in violation of human rights legislation (particularly in the United States and the United Kingdom where reinstatement is the presumptive penalty for dismissal tainted by age or sex discrimination)

•Dismissal for pregnancy in violation of employment standards

•Dismissal for trade union activities in violation of labour relations legislation

•Dismissal in violation of occupational health and safety legislation.

Reinstatement may also be awarded as a remedy for “illegal dismissals” in the federal jurisdiction and in Nova Scotia and Quebec.

Apart from these exceptions, labour relations legislation in Canada typically does not mandate reinstatement for unionized employees. A unionized employee’s right to reinstatement is derived from collectively bargained obligations on employers to dismiss only for just cause.

Even where a presumption of reinstatement exists and an employee has been dismissed without just cause, there are circumstances where reinstatement will not be awarded. There is a growing body of case law in which damages have been awarded in lieu of reinstatement.

Damages in lieu of reinstatement for unionized employee

In its 1968 decision in U.S.W.A. v. Port Arthur Shipbuilding Co., the Supreme Court of Canada limited the remedial powers of arbitrators and denied them the ability to substitute penalties following a finding of cause for discipline. Legislative amendments that followed were designed to correct this restriction by giving statutory authority to arbitrators to substitute penalties as necessary for the effective settlement of labour disputes.

Within this expanded jurisdiction, damages in lieu of reinstatement have been awarded by arbitrators in unionized settings in “extraordinary” circumstances. In A.U.P.E. v. Lethbridge Community College, the employment relationship was considered “moribund” because an employee was unable to fulfill his end of the employment “bargain” and completely unsuitable for his position. This kind of decision has occurred where:

•The employee was completely unable to carry out his employment duties

•The employee had a complete disregard for an essential aspect of the position, such as customer service

•The employee had an unco-operative and argumentative personality and a habitually bad attitude

•There was complete alienation from co-workers

•The employee was defiant and had a profound disdain for management

•There was a lack of co-operation that manifested in animosities leading to altercations

•The employee acted unsafely at work

•The employee was unrepentant for repeated misconduct or didn’t accept responsibility for any wrongdoing

•There was employer mistrust

•The employee couldn’t work in a team or carry out supervisory or leadership duties required of the position

•The employee created a poisoned atmosphere at work.

As the Supreme Court of Canada said in Lethbridge, the theory underlying the concept of non-culpable discharge short of just cause is that an employee’s failure to meet the obligations and reasonable expectations of employment constitutes a disruption of the employment relationship, which could make reinstatement impossible or unacceptable.

An employer’s decision to dismiss for unsuitability short of just cause can’t be made arbitrarily or discriminatorily, nor can it violate employment-related statutes such as human rights legislation. Employers still have a duty to accommodate disabilities and illness to the point of undue hardship. Where frustration of the employment contract occurs due to an employee’s disability, there may also be severance and notice obligations by law.

Assessing damages in lieu of reinstatement

Even where dismissal short of just cause is allowed, it is unclear from case law exactly how damages should be assessed. In Bisaillon c. Concordia University, the Supreme Court of Canada said unionization removes the employee’s right to independently negotiate with employers the terms and conditions of employment, including those related to discharge. The collective agreement itself must be the source of all payments relating to the termination of employment.

Despite this theoretical dilemma, arbitrators and courts have assessed damages in lieu of reinstatement on a completely individualized basis with no explicit root in collective agreement language. There has been reluctance, however, by arbitrators to adhere to the common law concept of “reasonable notice” in assessing damages, as demonstrated in Metropolitan Toronto (Municipality) and C.U.P.E. Local 79.

Instead, the focus has been on what the parties would have negotiated if the matter had been the subject of bargaining. Arbitrators have also assessed the quantum of damages to compensate an employee for the loss of “reasonable expectation” of reinstatement. This includes the loss of collective agreement privileges and rights, without consideration of the conduct that led to termination. On this basis, arbitrators have assessed the amount of damages to compensate for the loss of economic value of being a member of a bargaining unit and the recipient of the benefits and protections of a collective agreement.

While reinstatement remains the primary remedy for unjust dismissal in the unionized setting, damages in lieu of reinstatement may be awarded in “exceptional circumstances” where the employment relationship is found to no longer be viable, whether for culpable or non-culpable reasons.

In such circumstances, damages may be a valuable alternative when employers are concerned about potential problems caused by an unsuitable employee returning to the workplace. However, discharge with damages does not relieve an employer from its obligations under a collective agreement or statutory duties, such as the duty to accommodate.

But if an employee is unable to fulfill the essential terms of his employment contract, damages in lieu of reinstatement can be justified as the appropriate response to firing a problem employee short of just cause.

For more information see:

U.S.W.A. v. Port Arthur Shipbuilding Co., 1968 CarswellOnt 90 (S.C.C.).

A.U.P.E. v. Lethbridge Community College, 2004 CarswellAlta 533 (S.C.C.)

Bisaillon c. Concordia University, 2006 CarswellQue 3689 (S.C.C.).

Metropolitan Toronto (Municipality) v. C.U.P.E., Local 79, 2001 CarswellOnt 6001 (Ont. Arb. Bd.).

Sarah Crossley is a partner in the employment and labour law practice at Ogilvy Renault’s Toronto office. She can be reached at (416) 216-4782 or [email protected] Michael Torrance is a lawyer in the employment and labour law practice at Ogilvy Renault’s Toronto office. He can be reached at (416) 216-1908 or [email protected]

Latest stories