Arbitrator adopts ‘modern approach’ to the payment of damages in lieu of reinstatement in a construction industry case
A construction employee who had been discharged without just case was awarded over $100,000 in damages in lieu of reinstatement. Ryan Newell convinced the arbitrator that the ‘modern approach’ to damages was warranted in the circumstances, even though it appears no other arbitrator has adopted that approach in a construction industry context.
Background
The grievor, a bricklayer, had been steadily employed by a construction company for 11 years when he was terminated for alleged cause. He was quickly referred by the Union’s hiring hall to a different company to work under the same collective agreement.
The Union grieved the termination and at arbitration the parties agreed that, although the Employer had just cause for some discipline, termination was too severe a penalty. The parties also agreed that reinstatement was inappropriate in the circumstances and that, instead, the grievor was entitled to damages in lieu of reinstatement.
There were two issues in dispute:
- how damages in lieu of reinstatement should be calculated; and
- whether the damages should be subject to mitigation.
The parties’ arguments
The Employer argued that the appropriate approach to the calculation of damages in lieu of reinstatement was the “enhanced common law” approach with no top-up for lost benefits given that the grievor was quickly re-employed under the same collective agreement. The Employer acknowledged that the grievor lost steady employment as a result of the termination, but maintained that this was not a loss that should be compensated as part of an award of damages in lieu of reinstatement. Effectively, the Employer maintained that the loss of steady employment was insignificant under a collective agreement that set out a system that contemplated transitory employment.
On the second point, the Employer argued that the damages were subject to mitigation – i.e. they should be reduced by the income the grievor had received from his new employer. According to the Employer, it should only be ordered to pay about $6,500, given that the grievor had reduced his damages by quickly obtaining new employment.
In contrast, the Union urged the arbitrator to adopt the “modern approach” to the calculation of damages, which recognizes that damages in lieu of reinstatement in the labour law context is different from common law awards of pay of lieu of notice courts award in an employment law context. Damages in lieu of reinstatement are intended not just to compensate an employee for monetary loss, but also for the loss of the many benefits that employees enjoy under the collective agreement. For this reason, the common law approach should be rejected and the damages awarded to the grievor should not be subject to mitigation. And although this was a case involving the construction industry, in which employment if often transitory, the grievor’s long-term and stable employment was more akin to employment in an industrial setting, where arbitrators have long rejected the common law approach to these damages. He was entitled, the Union maintained, to be compensated for that loss.
The Arbitrator’s Decision
There are two aspects of this decision that are significant. Firstly, the Arbitrator accepted the Union’s argument that because the grievor’s employment was atypical of the construction industry in that it was not transitory, the “modern approach” was the appropriate approach to the calculation of damages in lieu of reinstatement:
23 The Grievor’s status as a long-term employee of the Employer puts him in a somewhat unique position in the construction industry. Such long-term employees in the construction industry, sometimes referred to as “steady eddies” stand in stark contrast to the generally accepted transitory nature of employment in the construction industry that has been recognized in the Board’s case law …
24 […S]ecurity of employment was a feature of the Grievor’s employment with the Employer. It is this “steady eddy” position and the relative security of continuing to be employed without interruption under the Collective Agreement that the Grievor lost. I disagree with the Employer that such a loss is not worthy of compensation in an award of damages in lieu of reinstatement. The loss of this relatively secure employment in the construction industry has value; in my view a just and reasonable result requires that the Grievor be compensated for that loss.
The Arbitrator held that the modern approach, rather than the common law approach, would best reflect “the labour relations reality of the Grievor’s circumstances.”
Secondly and most importantly, the arbitrator decided that the grievor’s damages should not be subject to mitigation. As noted above, the Union very quickly referred the grievor to work for a different contractor under the same collective agreement. Therefore, if his damages had been subject to mitigation, the Employer’s liability would have been very small. Hence, the Employer claimed to owe a maximum of approximately $6,500.00. However, the Arbitrator accepted the Union’s argument that the grievor’s damages ought not be subject to mitigation because the damages were not intended to compensate the grievor only for actual monetary losses:
26 The amount awarded will not be subject to mitigation because the award is not intended to compensate the Grievor for actual monetary losses, that would be subject to mitigation in the law of contract at common law. As described in Dalton, supra, relied upon by the Union “The monetary value of the loss of employment is determined by the payment of a sum of money instead of reinstatement. It is a fixed sum without regard to what may happen following the breach. Mitigation ought not to play any role in the final outcome. The remedy should represent, as close as one can reasonably determine, the monetary value for the loss of employment.” …
In the result, the Employer was ordered to pay the grievor more than $100,000.00 in damages.
To our knowledge, this is the first arbitral award in which a construction contractor has been ordered to pay damages in lieu of reinstatement with no reduction for mitigation, consistent with the arbitral approach that has become dominant outside of the construction industry.