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A recent Federal Court of Appeal decision raises an issue about the use of employment-law principles in labour cases. The court had no problem applying employment-law principles to a case decided by way of grievance, and it also deferred to a labour adjudicator on the application of those employment-law principles.

The facts in Canada (Attorney General) v. Gatien are both relatively straightforward and unfortunate. The grievor in that case was a non-unionized supervisor. Ms. Gatien was responsible for supervising a difficult employee, and had a number of complaints about that employee (both her own and complaints from other staff members). She was dealing with this employee through progressive discipline when, without explanation, she was ordered to stop just before issuing a written reprimand. Shortly thereafter, the employee in question assaulted the supervisor by pulling her hair and hitting her over the head. The employee was transferred to another unit the next day; the employer investigated, but the investigation was inconclusive (a classic she-said she-said).

Following the employee’s transfer, arrangements were made to allow the employee back into the workplace after hours to collect her belongings. The grievor became stressed about this prospect and so erected physical barricades in the workplace, taping filing cabinets shut and cardboard boxes together to build a wall that she papered with arrows to show the way to the employee’s work station. For this, the employer disciplined the grievor with a 10-day suspension. The supervisor grieved her suspension and also sought an award of damages from the employer. The Adjudicator allowed the grievance on the suspension (reducing it to an oral reprimand), but did not award any damages. The Federal Court of Appeal upheld that decision.

In employment law, after the Supreme Court of Canada’s 2008 decision in Honda Canada Inc. v. Keays, a court may award mental distress or moral damages, which are different from punitive damages, in the absence of independently actionable employer conduct, if an employer breaches its duty of good faith and fair dealing in the manner of dismissal. As the Supreme Court of Canada stated, “if the employee can prove that the manner of dismissal caused mental distress that was in the contemplation of the parties, those damages will be awarded…through an award that reflects the actual damages”.

Honda v. Keays involved a claim for wrongful dismissal by a non-unionized employee. It is not clear how or why this doctrine would apply in the unionized context. The Supreme Court of Canada in its 1976 decision McGavin Toastmaster v. Ainscough was definitive that the contractual rules governing the employment relationship were not to be applied in the unionized context, stating: “[t]he common law as it applies to individual employment contracts is no longer relevant to employer-employee relations governed by a collective agreement”. The Supreme Court has also more recently stated in Nor-Man Regional Health Authority Inc. v. Manitoba Association of Health Care Professionals that arbitrators are not legally bound to apply equitable and common law principles in the same manner as courts; arbitrators have a “distinctive role in fostering peace in industrial relations” and may take that role into account when deciding grievances.

Arbitrator Owen Shime addressed this dichotomy at great length (and with a significant depth of scholarship and analysis) in Teranet Inc v OPSEU, Local 507. Arbitrator Shime recognized that, as a labour arbitrator, he was not obliged to follow the contractual principles enunciated in Honda v. Keays and elsewhere. However, he decided that a labour arbitration has the authority to award damages for mental distress and punitive damages in a manner similar to that in employment law because these principles reflect “the underlying human condition and human element that exists in employment” regardless of whether an employee is unionized or non-unionized. Arbitrator Shime went on to explain that labour and employment cases still had important differences that could affect any award of damages. The most significant difference is the ability to reinstate an employee dismissed without cause:

the remedy of reinstatement, in my view, goes a long way to assuage any mental distress suffered by a grievor and reinstatement should be the primary redress for a discharged employee. It is only where the employer’s behavior is egregious, unfair, reprehensible or the like and the commensurate mental distress that arises is excessive that mental distress damages or punitive damages should be awarded. Both conditions must be present.

Arbitrator Shime was clearly alive to the differences between labour and employment law, and did not simply adopt employment-law principles without due consideration and sensitivity to those differences.

Gatien, however, involved a third or hybrid a situation. In the federal public service, non-unionized employees enjoy the same right to grieve disciplinary actions as unionized employees. Federal public servants in the core public administration cannot sue for wrongful dismissal or any other employment issue: they must grieve and, sometimes, refer their grievances to adjudication. (Public servants in separate agencies are treated differently and may sue for wrongful dismissal: see Haroun v. Canada (National Research Council)). Adjudicators are invariably members of the Public Service Labour Relations and Employment Board, and these adjudicators also apply the same principles to unionized and non-unionized employees.

In Gatien, the Adjudicator attempted to apply the same common law principles relating to bad faith that apply in employment law to non-unionized private sector employees; however, the Adjudicator erroneously stated at one point that he would not award bad faith damages because the conduct complained of “is not a ‘separate actionable course of conduct.’” The Adjudicator erred in so stating: the Supreme Court of Canada in Honda v. Keays eliminated the “separate actionable wrong” requirement for an award of bad faith damages. The Federal Court would have sent the matter back to the Adjudicator for redetermination using the correct legal test.

The Federal Court of Appeal, however, did not do so. The Court of Appeal concluded that the Adjudicator did not have to correctly state the legal test; instead, the standard of review was reasonableness. The Court of Appeal came to this conclusion by citing and applying the long line of cases where courts defer to the remedial and other legal decisions reached by labour arbitrators, concluding that: “determination of when damages may be awarded for bad faith conduct of an employer is not a matter of general importance to the legal system as a whole, but, rather, a matter that falls within the specialized expertise of labour adjudicators”.

I have added the emphasis to the word labour because, in my opinion, the Court of Appeal missed the point raised by Arbitrator Shime: there is a difference between labour law and employment law. The difference may be subtle, but there is a difference nonetheless.

Gatien was an employment law case decided by an Adjudicator who is an expert in labour law. Adjudicators are members of the labour board, tasked with fostering harmonious labour-management relations. They are undoubtedly experts in the unionized workplace and resolving labour-management conflict. The particular Adjudicator in Gatien, for example, had been a labour board member (federally and provincially) for almost 15 years when he decided that case. This does not make him an expert in employment law.

The irony in this case is that the Court of Appeal’s decision was written by Justice Gleason, who is undoubtedly an expert in employment law. The Court of Appeal spent eight paragraphs summarizing the principles of bad faith damages in employment law – correctly, and with the benefit of considerable expertise in the field. The Court of Appeal then forgave the error in law made by the Adjudicator on this point because the end result was reasonable.

Deference to labour arbitrators is not only acceptable but required in light of their relative expertise (compared to courts) in managing labour-management conflict. If an expert in labour law such as Arbitrator Shime decides that bad faith damages should be part of the unionized context in a manner similar (but slightly different) to the non-unionized context, courts should defer to that decision. It is not altogether clear why courts should defer to labour arbitrators who deliberately decide to apply employment law principles to non-unionized employees, given the important differences between the unionized and non-unionized workplaces.


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This content is not intended to provide legal advice or opinion as neither can be given without reference to specific events and situations. © 2021 Nelligan O’Brien Payne LLP.

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