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Federal Court upholds decision to compensate, but not reinstate, former CMHC senior auditor

by HR Law Canada

The Federal Court has upheld a labour adjudicator’s decision to compensate, but not reinstate, a former senior auditor at the Canada Mortgage and Housing Corporation (CMHC).

This case revolved around claims of unjust dismissal, the refusal to reinstate the auditor, identified as L.F., and the appropriateness of costs and damages awarded.

The court found that the adjudicator’s decision to dismiss L.F.’s request for reinstatement and back pay, while awarding him $45,000 in aggravated damages and partial indemnity costs, was reasonable and well-supported by evidence and legal standards.

Background of the case

L.F., who had been with CMHC since 2007, was terminated without cause in 2014 after concerns about his performance and ability to collaborate with colleagues.

Prior to his dismissal, he had been disciplined for a conflict of interest issue and was on leave due to stress and anxiety exacerbated by delays in his performance evaluation.

Following his termination, L.F. filed a complaint for unjust dismissal under the Canada Labour Code. The adjudicator ruled in his favour, awarding him 12 months’ salary in lieu of notice and aggravated damages due to CMHC’s handling of the dismissal process. Both L.F. and CMHC sought judicial reviews of various aspects of the adjudicator’s decision.

Court’s analysis and ruling

Procedural Fairness and Credibility Findings:The court determined that the adjudicator did not breach procedural fairness and that her credibility assessments of the witnesses were reasonable. The court noted, “The adjudicator’s conclusions on credibility and findings of fact are based on the evidence that was presented to her,” thus supporting her decision not to reinstate LF due to the deteriorated relationship and mutual lack of trust between LF and CMHC.

Reinstatement and Back Pay: The court upheld the adjudicator’s decision to refuse reinstatement, emphasizing that such a remedy is not automatic even in cases of unjust dismissal. The adjudicator had found that L.F.’s medical condition precluded his return and that there was significant mutual distrust. Additionally, the decision not to award back pay was deemed reasonable because L.F. was on long-term disability benefits, thus already “whole” financially.

Aggravated Damages: The award of $45,000 in aggravated damages was upheld, as the adjudicator found CMHC’s conduct in the termination process unduly insensitive and in bad faith. This included delays in L.F.’s performance review and reliance on unfounded allegations to justify termination. The court found this amount justified given the circumstances and the evidence presented.

Costs: The court also reviewed the decision on costs, where L.F. was awarded partial indemnity of $32,067. The adjudicator had noted that CMHC’s settlement offer exceeded the final award, thus justifying the partial indemnity. This approach was found to be reasonable and aligned with the principles of ensuring that financial compensation is not unduly reduced by legal fees.

Key takeaways

  1. Discretion in Remedies for Unjust Dismissal: Reinstatement is not an automatic remedy in unjust dismissal cases. Adjudicators have broad discretion to grant appropriate remedies, including compensation and damages, based on the specific circumstances and evidence.
  2. Importance of Procedural Fairness: Credibility assessments and procedural fairness are critical in adjudication processes. The court’s decision underscores the importance of detailed, evidence-based adjudicator decisions.
  3. Handling of Termination: Employers must handle terminations with care, ensuring fairness and avoiding bad faith actions. Delays and unfounded allegations can lead to significant aggravated damages, as seen in this case.

For more information, see LF v. Canada Mortgage and Housing Corporation, 2024 FC 452 (CanLII).

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