Calculating Damages for Unjustly Dismissed Federally Regulated Employee

This article was prepared with the assistance of articling student Daniel Hsieh.

Previously printed in The Lawyer’s Daily, a LexisNexis Canada publication.

The Canada Labour Code is a unique creature. Unlike non-union provincially regulated employees in most Canadian jurisdictions, federally regulated employees who have more than 12 months’ service and who are not managers, are protected from without cause termination in most circumstances. How then to calculate an entitlement to damages for an employee who is unjustly dismissed in contravention of the Code, given the breach of that added protection?

The Federal Court of Appeal weighed two competing approaches in Hussy v. Bell Mobility Inc. 2022 FCA 95. Unfortunately, the answer (for now) remains “it depends.”

Background

As found by an adjudicator appointed under the Code, R.S.C. 1985 c. L-2, the applicant was unjustly dismissed by the employer. The adjudicator ordered the applicant to be compensated. The applicant applied for judicial review based on the method used in awarding her compensation by the adjudicator and for outstanding back pay she was to receive.

The court found the adjudicator’s award of compensation was appropriate and did not justify its intervention. The applicant appealed the court’s decision to dismiss her application for judicial review to the court. In addition, the employer applied for cross-appeal on the basis of the costs award.

Federal Court of Appeal

The main issue before the court was the reasonableness of the adjudicator’s assessment of compensation for non-reinstatement. Ultimately the court dismissed both appeal and cross-appeal, finding that the adjudicator’s award was reasonable.

The court evaluated two competing approaches for compensation of loss upon unjust dismissal under the Code. The first is the “common law approach” which uses the common law measure of damages for wrongful dismissal as a reference point and then adjusts to account for the loss of additional protections offered by the Code to federally regulated employees.

The second is the “fixed term approach” which calculates the amount the employee would have earned with continued employment until retirement and then discounted for various contingencies such as the likelihood of subsequent dismissal, a change in health or employer, technological change or employer insolvency to arrive at a fair compensation. Both methods recognize that an unjustly dismissed employee, who is not then subsequently reinstated, has lost valuable rights for which compensation is payable. The difference between the two is how compensation is assessed.

The court refused to decide which approach is correct, and instead focused on whether the adjudicator’s decision was reasonable. The court found the adjudicator was reasonable in choosing the common law approach. Past service of an employee is not the only element considered for assessing reasonable notice damages. The trier of facts will also need to consider the loss of the just cause protection which is a unique feature of the Code.

[ 48] ” … The final amount is expressed in terms of monthly earnings, it is not intended to be income replacement. It is compensation for the loss of the protection from unjust dismissal.”

Comment

In concluding on this issue, the Federal Court of Appeal found the adjudicator’s preference for the common law approach was reasonable, but also left the door open for adjudicators to continue to apply the fixed term approach.

The human resources community would greatly benefit from the adoption of a single approach for calculating damages for federally regulated employees who are unjustly dismissed. Leave to appeal to the Supreme Court of Canada was filed on Sept. 8, 2022. That application for leave has not yet been decided at the time of writing. Alas, we will have to continue to wait for further clarity.

While every effort has been made to ensure accuracy in this update, you are urged to seek specific advice on matters of concern and not to rely solely on what is contained herein. The document is for general information purposes only and does not constitute legal advice.