A labour arbitration board which awarded damages in lieu of reinstatement to an employee dismissed without just cause for non-culpable incompetence did not act unreasonably even when the case law indicated that the jurisdiction to substitute an award of damages in lieu of reinstatement should be exercised in “exceptional” or “extraordinary circumstances”. The board properly considered the whole of the circumstances and reached a reasonable conclusion as to the viability of the employment relationship. The board’s decision fell within the bounds of arbitral jurisprudence requiring a finding of exceptional circumstances prior to substitution of remedy.

Alberta Union of Provincial Employees v. Lethbridge Community College, [2004] S.C.J. No. 24, Supreme Court of Canada, April 29, 2004, McLachlin, C.J. and Iacobucci, Major, Bastarache, Binnie, Arbour, LeBel, Deschamps and Fish JJ.

The appellant employer hired the respondent grievor as scheduling co-ordinator but dismissed her on the grounds that she failed to meet deadlines and her work was incomplete. The grievor and respondent union grieved the dismissal alleging dismissal without just cause in contravention of the collective agreement. The arbitration board found that, while the grievor was dismissed for non-culpable incompetence, just cause for discharge had not been shown, as the employer had failed to comply with the criteria set out in Re Edith Cavell Private Hospital and Hospital Employees Union, Local 180 (1982), 6 L.A.C. (3d) 229 (B.C.) for dismissal of an employee on the grounds of non-culpable deficiency. In fashioning a remedy, the board concluded it could substitute a financial award under the relevant provisions of the Alberta Labour Relations Code, R.S.A. 2000, c.L-1 (the “Code”), even where the usual and expected remedy was reinstatement.

On application for judicial review, the Alberta Court of Queen’s Bench dismissed the application on its merits finding that the board’s interpretation of the Code was reasonable and it was further reasonable to substitute another remedy for reinstatement where special circumstances existed and on the basis of broad remedial authority. The Court of Appeal overturned the chamber judge’s findings, determining that the appropriate standard of review for the interpretation of the Code was correctness while the board’s decision as to remedy was to be reviewed against a standard of patent unreasonableness. It further found that the board was incorrect in its application of the Code and that the board did not consider whether extraordinary circumstances existed to justify variation of the remedy.

The board’s decision was restored by the Supreme Court of Canada. Applying the pragmatic and functional approach, the standard of review applicable to the board’s interpretation of the Code provisions and to the board’s award was that of reasonableness.

The board’s interpretation of the Code was reasonable. While the provision can reasonably support an interpretation which limited its application to culpable dismissals, the board had ample reasons to adopt a broader but equally reasonable interpretation and conclude that the provision applied to both culpable and non-culpable dismissals. The argument that, absent a finding that the criteria set out in Re Edith Cavell had been met, the arbitrator is required to reinstate the employee on the basis that the employer has not established cause for the employee’s dismissal or discipline, is a narrow and mechanistic approach to employee conduct and arbitral authority and does not take full account of the arbitrator’s dispute resolution mandate, nor does it adequately consider the myriad of employment circumstances that employees and employers confront. The criteria set out in Re Edith Cavell should not dictate the terms of remedial authority exercised by the arbitrator.

There is no practical reason why arbitrators ought to be stripped of their remedial jurisdiction when confronted by labour disputes that turn on a distinction between culpable and non-culpable conduct and a finding of cause thereafter. A broader interpretation of the provision, as considered by the board, produces results more consistent with statutory objectives. On the whole, having regard to the language of the provisions, their purpose and place within the Code, and to the object of the collective agreement, the arbitrator’s interpretation was clearly reasonable.

The exercise of the board’s remedial power was also reasonable. As a general rule, where a grievor’s collective agreement rights have been violated, reinstatement of the grievor to her previous position will normally be ordered. Departure from this position should only occur where the arbitration board’s findings reflect concerns that the employment relationship is no longer viable. On balance, the board’s comments in its decision reflected concerns about the continued viability of the employment relationship, and fell squarely within the ambit of exceptional circumstances as reflected in prior arbitral decisions.

To stay current with the new case law and emerging legal issues in this area, subscribe here.