Nelligan O'Brien Payne gratefully acknowledges the contribution of Sarah Clowater, Student-at-Law, in writing this blog post.
Bahniuk v. Canada (Attorney General) is a recent labour case from the Federal Court of Appeal that raises important questions about a grievor’s duty to mitigate between termination and reinstatement.
Mr. Bahniuk worked for the Canada Revenue Agency (“CRA”) for 24 years before CRA terminated his employment. He had a lengthy disciplinary record that included three suspensions. He grieved these suspensions, along with his termination, at the Public Service Labour Relations and Employment Board (which, in light of the fact it is changing its name for a second time in as many years, we will just call the Federal-Tribunal-That-Must-Not-Be-Named). The Adjudicator set aside the termination and reduced some of the suspensions, but declined to award reinstatement due to Mr. Bahniuk’s poisoned workplace relationships.
Instead, the Adjudicator awarded damages in lieu of reinstatement using the “economic loss” approach. This approach takes the value of the maximum salary and benefits that the grievor could have earned had they been reinstated, and then reduces the amount on a percentage basis to reflect: (a) any contingencies that may have prevented the grievor from continuing in their employment; and (b) the grievor’s obligation to mitigate. Here, the Adjudicator calculated the amount of income that Mr. Bahniuk would have earned between the time of reinstatement and his likely retirement date (a period of 11 years), and reduced it by 90% because it was “almost certain” that Mr. Bahniuk would have been fired for cause shortly after he was reinstated, based on his lengthy disciplinary record. This reduced the damage award to approximately 14 months’ worth of salary and benefits.
Then, bizarrely, the Adjudicator subtracted Mr. Bahniuk’s self-employment income, earned over two years after his termination, from the damage award. The grievor judicially reviewed the decision to the Federal Court, and lost, and then appealed that decision to the Federal Court of Appeal.
At the Federal Court of Appeal, the grievor argued that it was unreasonable for the Adjudicator to reduce his damages by mitigation income earned outside the notice period.
It was unreasonable because it was contrary to the principle that any deductions from damage awards for mitigation must be attributable to the loss for which damages were awarded. Here, Mr. Bhaniuk tried to find alternate employment for two years following his termination. When that failed, he started his own general contracting business and earned income at this point.
However, his damages award was only attributable to the 14 months following his termination – as such, it was unreasonable for the Adjudicator to deduct income earned after this period. Overall, Bahniuk seems like a pretty straightforward decision: the employer does not get credit for income a grievor earns at any point in his or her lifetime (no surprise there!). But it does bring up two other issues that would be helpful for courts to provide guidance on.
1) What is the appropriate way of quantifying damages in lieu of reinstatement?
Currently, there are a variety of methods labour arbitrators use for calculating damages in lieu of reinstatement. In this case, the Adjudicator used the economic loss approach, which is a fairly common method. However, other decision-makers will use the “current approach”. This involves applying a formula based on the grievor’s years of service, which is then adjusted to compensate the grievor for the loss of protection they previously had under a collective agreement – it is basically the same approach used for calculating damages for non-unionized employees, plus a little extra.
It would be helpful to receive some clarity on what is the appropriate calculation arbitrators should apply when calculating damages in lieu of reinstatement. While it is desirable to allow arbitrators flexibility to decide cases based on their particular facts, a unified approach to calculating damages in lieu of reinstatement could provide predictability, efficiency, and expediency for grievors.
2) Should a grievor have a duty to mitigate?
The other question this case raises is whether or not a grievor should even have a duty to mitigate between the period of termination and an arbitrator’s decision. Some arbitrators require a grievor to take steps to mitigate his or her damages, and if they fail to do so, the arbitrator may reduce the damages on termination, the same way courts treat non-unionized employees.
However, other arbitrators apply what is called the “correct approach” and have noted that there are conceptual differences between unionized and non-unionized employees. While a non-unionized employee is normally limited to recovering notice damages on termination, most unionized employees have a reasonable expectation of getting their job back if they successfully grieve the termination. Indeed, in Bahniuk, the Federal Court of Appeal acknowledges that reinstatement is the presumptive remedy, and damages in lieu of reinstatement are rare.
As such, should the employee be expected to find a different job when he or she has a reasonable expectation of being reinstated? Moreover, unionized employees have organized and bargained for greater protections and, therefore, should be entitled to greater protection from common law doctrines that could have harsh effects on a grievor. As such, it is questionable that a grievor should have a duty to mitigate between the date of termination and the date the arbitrator awards damages in lieu of reinstatement.