Name of case: The Board of Governors of Lethbridge Community College v. Alberta Union of Provincial Employees

Supreme Court Panel: Chief Justice Beverley McLachlin and Justices Frank Iacobucci, John Major, Michel Bastarache, Ian Binnie, Louise Arbour, Louis LeBel, Marie Deschamps and Morris Fish

Court appealed from and date of judgment: Judgment of the Alberta Court of Appeal dated May 30, 2002.

Facts: Sylvia Babin, Scheduling Co-ordinator in the Student Services Division at Lethbridge Community College, was fired on October 9, 1997 for failing to complete assignments and meet deadlines. The Alberta Union of Public Employees launched a grievance against Babin's discharge.

Case history: On December 21, 1999, a board chaired by William McFetridge allowed the grievance, ruling that although Babin was incompetent, the discharge was improper because the College "failed to provide the grievor with adequate warning regarding her performance," as required by Re Edith Cavell Private Hospital and Hospital Employees Union, Local 180 (1982), 6 L.A.C. (3d) 29 (Hope). However, the board ruled that, since Babin's position had been eliminated in a workplace reorganization, reinstatement was not appropriate. Instead, it awarded damages equivalent to four months' pay under s.142(2) of the Alberta Labour Relations Code, which provides: "If an arbitration board … determines that an employee has been discharged or otherwise disciplined by an employer for cause and the collective agreement does not contain a specific penalty for the infraction that is the subject-matter of the arbitration, the arbitrator … may substitute some other penalty for the discharge or discipline that to the arbitrator, arbitration board or other body seems just and reasonable in all the circumstances."

The Alberta Court of Queen's Bench rejected the union's application for judicial review. However, the Alberta Court of Appeal overturned the arbitration award, ruling that "s.142(2) of the Labour Relations Code applies only where the arbitrator finds there was cause for the discipline, i.e., the conduct was culpable, but the penalty was not just and reasonable." Although the Court of Appeal accepted that arbitrators have "original jurisdiction to award damages rather than reinstatement for unjust dismissals or discipline for non-culpable conduct," it held that such jurisdiction should be exercised only in "exceptional circumstances," described as "those that 'totally destroy' the viability of the employment relationship." The Court of Appeal emphasized that "extraordinary circumstances" are usually found in cases involving theft or deceit, and stated: "There are very few cases of 'extraordinary circumstances' where the conduct of the employee was non-culpable." In this case, the Court of Appeal concluded, "the board did not rely on this [broad remedial] power, and did not consider and determine if extraordinary circumstances existed." In any event, it was "doubtful that such a finding could have been justified or sustained." As a result, the Court of Appeal ordered Babin reinstated.

Supreme Court's decision (unanimous): The appeal was allowed.

Reasons: Writing for the Court, Justice Frank Iacobucci held that s.142(2) of the Alberta Labour Relations Code "reasonably supports two differing interpretations," in that the word "discharged" in that section could mean "discharged solely for disciplinary reasons," or could include both culpable and non-culpable dismissals. In Iacobucci's view, the broader interpretation was consistent with the dictionary definition of the verb "discipline," and with the statutory language allowing the board to substitute "some other penalty" that "seems just and reasonable in all the circumstances." Furthermore, Iacobucci ruled that a broad interpretation meshed with the Code's objectives of promoting an "effective relationship between employees and employers," and securing "prompt, final, and binding settlement of disputes." Iacobucci also held that s.142(2) had to be read "harmoniously" with s.135 of the Code, which requires every collective agreement to include a method for the settlement of disputes arising under the collective agreement. "Read in concert," he wrote, "these provisions equip arbitrators with the tools required to facilitate effective and binding labour dispute resolution."

In addition, Iacobucci held that a broad interpretation of s.142(2) was consistent with Supreme Court jurisprudence that "has recognized the broad remedial powers required to give effect to the grievance arbitration process," starting with Heustis v. New Brunswick Electric Power Commission, [1979] 2 S.C.R. 768, a decision which "foreshadowed an expansion of arbitral authority." Citing St. Anne Nackawic Pulp & Paper Co. v. Canadian Paper Workers Union, Local 219, [1986] 1 S.C.R. 704; Weber v. Ontario Hydro, [1995] 2 S.C.R. 929; and Parry Sound (District) Social Services Administration Board v. O.P.S.E.U., Local 324, [2003] 2 S.C.R. 157, Iacobucci declared: "These decisions mark a trend in the jurisprudence toward conferring on arbitrators broad remedial and jurisdictional authority." Iacobucci noted "the oft-repeated recognition of the fundamental importance of arbitral dispute resolution," and the principle that "[a]rming arbitrators with the means to carry out their mandate lies at the very core of resolving workplace disputes." Applying these principles, Iacobucci rejected the employer's argument that arbitrators lack jurisdiction to award damages in lieu of reinstatement in non-culpable discharge cases. He declared: "In my opinion, this narrow and mechanistic approach to employee conduct and arbitral authority does not take full account of the arbitrator's dispute resolution mandate, nor does it consider adequately the myriad of employment circumstances that employees and employers confront."

Iacobucci questioned whether the distinction between culpable and non-culpable conduct was even relevant to the determination of a proper remedy, stating: "A failure to meet the obligations and reasonable expectations of employment whether by virtue of culpable misconduct or deficient performance of a non-culpable character equally constitutes a disruption of the employment relationship." Quoting from the Supreme Court's decision in Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27, Iacobucci declared: "[T]he legislature does not intend to produce absurd consequences," and added: "[A]n interpretation may be viewed as absurd where it is incompatible with … the object of the legislative enactment." In this case, Iacobucci concluded, the lower court's decision was somewhat absurd: "In my opinion, the Court of Appeal's interpretation of s.142(2) is somewhat incompatible with the object of the legislation and the overall purpose of the provision. As discussed earlier in these reasons, the purpose of the legislation is to facilitate arbitral dispute resolution, and the content of the legislative scheme provides for arbitrators to do so. Given this context, there is no practical reason why arbitrators ought to be stripped of remedial jurisdiction when confronted by labour disputes that turn on a distinction between culpable and non-culpable conduct and a finding of cause thereafter."

Iacobucci observed that there was "arbitral consensus" that the jurisdiction to substitute damages should be exercised only in "exceptional" or "extraordinary circumstances," but pointed out that "exceptional circumstances" can exist in discharge cases involving both culpable and non-culpable conduct. In his view, "[w]hile culpable conduct is far more likely to lead to a poisoned or inhospitable work environment than conduct characterized as non-culpable, the consequences of the conduct and not its characterization should be the primary focus of the remedial inquiry." The correct approach, in Iacobucci's view, requires an assessment of "the whole of the circumstances": "For arbitration to be effective, efficient and binding it must provide lasting, practicable solutions to workplace problems. Commensurate with the notion of exceptional circumstances as developed in arbitral jurisprudence is the need for arbitrators to be liberally empowered to fashion appropriate remedies, taking into consideration the whole of the circumstances."

In the case at hand, Iacobucci held that "the arbitration board properly considered the whole of the circumstances in concluding that an award of damages was more appropriate than reinstatement of the grievor." Specifically, Iacobucci noted, the board took into account that Babin's position had been eliminated in a bona fide reorganization, that it would be difficult to find her an alternative position, and that reinstatement would "prolong the ultimate resolution of the issue" — considerations that, in Iacobucci's view, "fall squarely within the ambit of exceptional circumstances." He wrote: "As a general rule, where a grievor's collective agreement rights have been violated, reinstatement of the grievor to her previous position will normally be ordered. Departure from this position should only occur where the arbitration board's findings reflect concerns that the employment relationship is no longer viable. In making this determination, the arbitrator is entitled to consider all of the circumstances relevant to fashioning a lasting and final solution to the parties' dispute."

Therefore, Iacobucci concluded, the arbitration board reasonably exercised its remedial jurisdiction by awarding damages in lieu of reinstatement, given its "reasonable conclusion as to the continued viability of the employment relationship." In the result, the Court allowed the College's appeal with costs throughout, set aside the Court of Appeal's decision, and restored the arbitration board's award.

Date of the Supreme Court's decision: April 29, 2004

Reference: For analysis, see Lancaster's Labour Arbitration News, May/June, 2004.

Full text of decision:
http://www.lancasterhouse.com/decisions/2004/apr/scc-lethbridge.htm