The reinstatement decision - alternatives and approach

Termination of employment has been referred to as the “capital punishment” of employment law - fully and finally bringing the employment relationship to an end. Where the employer is unionized, the collective agreement requires the employer to demonstrate that it had just cause to terminate, failing which an employer can be ordered to “reinstate,” or take back, the employee - often with damages for back pay/lost time.

Similarly, in cases of “unjust dismissal” under the Canada Labour Code, which generally applies to non-managerial employees of federal employers who are terminated for cause, an adjudicator has the discretion to reinstate the employee following their loss of their employment. In both cases, there is a broad remedial authority to fashion an appropriate remedy, with reinstatement as the usual remedial cornerstone of the award or decision.

But as many employers, unions, and even employees will acknowledge, reinstatement isn’t always the appropriate remedy. In fact, at times, even if it is determined that the employee was unjustly dismissed or terminated without cause, the question is why would an employer choose to argue that reinstatement is not the appropriate remedy and damages should be ordered instead? This is an important and strategic decision, one reserved generally for exceptional cases.

It is established law that arbitrators and adjudicators have the jurisdiction to award damages in lieu of reinstatement. In restoring the award of a board of arbitration which held that reinstatement was appropriate, the Supreme Court of Canada - in the case of A.U.P.E. v. Lethbridge Community College, 2004 SCC 28 - set out generally the circumstances where damages would be appropriate, stating that where a grievor's collective agreement rights were violated, reinstatement to employment would normally be ordered and departure from this position should only occur where the arbitrator’s findings reflect concerns that the employment relationship was no longer viable.

In making this determination, the arbitrator is entitled to consider all of the circumstances relevant to fashioning a lasting and final solution to the parties' dispute.

On this basis, there are two overarching considerations in determining whether to argue against reinstatement - first, are there sufficient factors to demonstrate that reinstatement is not an appropriate remedy; and second, if damages are ordered in lieu of reinstatement, how are those damages to be determined?

Factors against reinstatement

Courts and arbitrators have weighed in over the years on the factors or reasons militating against reinstatement - disparagement of the employer (Matthews v. Absolute Charters Incorporated, 2019 CanLII 113315); unprofessional conduct or the creation of an unfriendly work environment (Peterborough Regional Health Centre and Ontario Nurses Association); the specific conditions of the workplace (Brink’s Canada Limited v. Teamsters, Local 213); or a loss of trust between the Employer and employee (Custom Control Panels Inc. v. CEP, Local 546 (Zhang), Re). In the case of De Havilland Inc. v CAW-Canada, Local 112, [1999] OLAA No. 767, the arbitrator distilled these factors to the following:

• The refusal of co-workers to work with the grievor
• Lack of trust between the grievor and the employer
• The inability or refusal of the grievor to accept responsibility for any wrongdoing
• The demeanor and attitude of the grievor at the hearing
• Animosity on the part of the grievor towards management or co-worker
• The risk of a “poisoned” atmosphere in the workplace.

While this not an exhaustive list, the common factor where damages are awarded in lieu of reinstatement is often that the employment relationship is no longer viable or, to use the term that is often referenced in “just cause” cases, the relationship of trust necessary for the employment relationship to function has been “irrevocably breached.”

This leads to the issue of the appropriate calculation of damages in lieu of reinstatement. In the 2018 case of Lakehead University and Lakehead Faculty Association, 2018 CanLII 6283, arbitrator G.T. Surdykowski provided an early framework for the calculation of damages in lieu of reinstatement.

The case dealt with the termination of the employment of a professor in the Lakehead History Department. After determining that there was insufficient cause for termination, the arbitrator also held that it would be impossible to reinstate the professor given that the relationship between him and the University had been damaged beyond repair.

He then turned to the calculation of damages in lieu of reinstatement, and came up with the two models: the common law wrongful dismissal approach, where an assessment of what common law damages for pay in lieu of notice would be employed; and the “fixed term” approach, which is premised on the assumption that an employee bound by a collective agreement might work for the employer until retirement, basing the damages on the value of the wages and benefits the professor would have earned from the date of discharge all the way up to the expected date of retirement.  

This was ultimately the model the arbitrator employed, which of course resulted in damages which were significantly higher than those under the wrongful dismissal framework.

Reasonable notice approach

While this is not a universally accepted approach, in the case of Hussey v. Bell Mobility Inc., 2022 FCA 95, the Federal Court of Appeal held that there is no consensus among arbitrators or adjudicators as to the appropriate approach and, as a result, the adjudicator’s decision to implement the common law approach was not unreasonable.

What this means is that courts, adjudicators, and arbitrators will likely be given broad discretion and deference in fashioning a remedy where reinstatement is not appropriate, which may not be the preference of either the employer or the employee.

Determining which compensatory approach to use may come down to factors such as the service of the employee, the overall compensation, and the daunting prospect that an award could seek to compensate an employee for a very long period of time.