Potential chance to clarify compensation rule is lost

Employment/Labour /
Stephen J. Moreau
Latest posts by Stephen J. Moreau (see all)

By Paul Russell, LegalMatters Staff • The Federal Court of Appeal missed a potential opportunity in March to clear up confusion about how to determine compensation if someone is fired without cause and is to be paid damages in lieu of reinstatement, says Toronto employment and labour lawyer Stephen J. Moreau. 

When a unionized employee or certain non-union employees regulated by Canada Labour Code are terminated from their employment, they can bring grievances and complaints of unjust termination, he explains, with the ultimate remedy, if successful, being reinstatement into the workplace.

“There are, however, some cases where, despite the fact the employee is successful, their reinstatement is not ordered,” says Moreau, a partner with Cavalluzzo LLP. “These cases usually involve situations where reinstatement is simply not tenable.”

‘Two vastly different calculation methods’

For decades, arbitrators and Canada Labour Code adjudicators have struggled with the question of how to value damages for those denied reintegration in the workplace, he says.

“Two vastly different calculation methods” have emerged,” Moreau says. “The first, the “fixed term approach,” calculates an estimated loss of future income from the date of termination until some date in the future, discounted for contingencies.

The other, or “common law” method, calculates a severance payout to the employee in a way a common law court would if awarding wrongful dismissal damages, he says, adding “albeit, the figure is grossed up a percentage to recognize the unique position of those with collective agreement or legislative protections from just cause firings.”

Moreau says both methods have their defenders among well-known and well-respect arbitrators and adjudicators.

“When such decision-makers take time to articulate a preferred method, it is not uncommon for them to criticize the opposite approach as unprincipled,” he says. “In short, the jurisprudence is deeply divided.”

“I would say that the second of those two methods is so wrong in principle that it should be rejected under any standard,” Moreau tells LegalMattersCanada.ca.

Appeal court missed an opportunity

Within this context, he says the latest Federal Court of Appeal case to weigh in represents a critical but lost opportunity to set the law straight.

“In the case of Hussey v. Bell Mobility Inc., in which I represented the appellant, the court acknowledged there are two ways to determine compensation in these cases and that it is best to leave it to the arbitrators and adjudicators to decide which to choose,” Moreau says.

According to court documents, Amanda Hussey was terminated for cause in 2017 after she repeatedly breached Bell’s policies regarding punctuality during her seven years with the firm. She filed a complaint for unjust dismissal under the Canada Labour Code, with the arbitrator ruling that Bell had an obligation to apply progressive discipline and it failed to do so. The adjudicator held that Hussey was entitled to damages in lieu of reinstatement, with her legal counsel arguing that damages should be awarded based upon the fixed-term method. 

“If it was not for termination, Ms. Hussey would have continued as a store managerand would have eventually been promoted to regional manager,” Moreau says.

“The arbitrator decided to instead go for the common law approach of awarding notice based on years of service,” he adds.

That amounted to eight months’ pay, plus four months’ pay, “for the value of the loss of the unjust dismissal protection,” the arbitrator’s judgment reads, amounting to one year’s pay.

Underlying jurisprudence is hopelessly divided

“The Federal Court of Appeal upheld those damages,” says Moreau, “while acknowledging that method the arbitrator used to determine compensation was potentially unreasonable. In essence, what the court was saying was that it was not fit it to weigh in on a matter such as this, even if the underlying jurisprudence is hopelessly divided.

“For several decades now, labour arbitrators and adjudicators have not sorted out how damages are calculated in cases where people are fired without cause but are not being reinstated,” he says.

“The court missed an opportunity here to declare the common-law approach as unreasonable,” Moreau adds. “That means this ruling will just sow more confusion around this issue.”

Two hypothetical examples

He gives two hypothetical examples to show the difference between the two approaches. In the first scenario, an employee with 30 years’ experience is terminated without cause. They appeal, and the arbitrator rules that since they can’t be put back into their old position, they should receive damages equivalent to approximately 24 months of pay.

“Under the first method, we have to think about what would have happened if this person was not fired. Because they are older, maybe they would have retired in six months. So are they only owed six months’ pay?”

His second example is of an employee in their early 30s with five years of service. Once terminated, the common-law approach would give them seven or eight months of pay.

“This person may still have a 30-year career ahead of them,” Moreau says. “If we use the ‘fixed term,’ theoretically they are out 30 years of pay, even though no court or tribunal would ever give that, as there are so many things that may happen in that time period.”

He says he is disappointed the court deferred to a common-law approach to determine the notice period.

“This issue is much bigger than just lawyers arguing about methodology and principle,” Moreau says. “These decisions about which method you choose have a real-life impact on people.

He says he has asked the Supreme Court of Canada for leave to appeal in the case.

‘There shouldn’t be any uncertainty about this issue’

“There shouldn’t be any uncertainty about this issue,” Moreau says. “We should know at the outset of any case how the notice period in damages in lieu of reinstatement cases is going to be determined.”

The Federal Court of Appeal avoided taking on that task, he says, noting the judgment reads, “this Court’s task in this appeal is not to choose between the common law approach and the fixed term approach, but rather to decide if the Adjudicator’s choice of the common law approach was unreasonable … the Supreme Court has definitively ruled that it is not this Court’s function to choose between lines of arbitral authority when both lines are reasonable.”

Moreau says this decision shows that the courts are “very deferential toward front-line adjudicators working in labour/employment law.

“What is interesting from a more macro level is, will the Supreme Court adopt this attitude or hold that deference hits a breaking point when the underlying division in the law abounds?” he adds. “We may soon find out.”

More from Cavalluzzo LLP:

Unionized workers’ right to strike can be misunderstood