Damages In Lieu Of Reinstatement In Grievance Arbitration

• Published date: 23 January 2024
• Subject Matter: Employment and HR, Litigation, Mediation & Arbitration, Retirement, Superannuation & Pensions, Unfair/ Wrongful Dismissal, Employee Benefits & Compensation, Arbitration & Dispute Resolution
• Law Firm: Dentons
• Author: Russell Groves and Salim Visram

In an unjust dismissal grievance arbitration, where the employer fails to establish cause for dismissal, the usual remedy is reinstatement of the grievor and payment of all of their lost wages. In exceptional circumstances, however, reinstatement of a dismissed grievor may not be appropriate. In these circumstances an arbitrator may exercise their discretion to award damages to the grievor in lieu of reinstatement. Damages awarded by grievance arbitrators are intended to compensate the grievor for loss of their benefits under the applicable collective agreement, and involve different considerations than a calculation of damages payable to a non-unionized employee for wrongful dismissal at common law.

When are damages in lieu of reinstatement awarded?

The Supreme Court of Canada confirmed that departure from the remedy of reinstatement of a wrongfully dismissed grievor should only occur in "exceptional circumstances" where the employment relationship has been "totally destroyed."¹ Given the high threshold of "exceptional circumstances," grievance arbitrators will exercise their discretion carefully before awarding damages in lieu of reinstatement.

In De Havilland v. CAW-Canada, Local 112, a list of "exceptional circumstances" was compiled by the grievance arbitrator following a thorough review of cases where damages in lieu of reinstatement were appropriate. The arbitrator noted several indicators that an employment relationship may be "totally destroyed":

1. The refusal of co-workers to work with the grievor.
2. Lack of trust between the grievor and the employer.
3. The inability or refusal of the grievor to accept responsibility for any wrongdoing.
4. The demeanor and attitude of the grievor at the hearing.
5. Animosity on the part of the grievor towards management or co-workers; and
6. The risk of a "poisoned" atmosphere in the workplace.²

In considering the above circumstances, an arbitrator's overarching concern is whether the employment relationship is "viable" notwithstanding any conflict between the grievor, the union and the employer.

A number of factors may affect the viability of continued employment, including whether the parties are willing to accept responsibility for any misconduct, direct evidence in respect of the level of trust between the grievor and the employer and whether the grievor's position involves safety issues in the workplace.

How are damages calculated?

Damages in lieu of reinstatement are not comparable to pay in lieu of notice at common...