An arbitrator has reduced the compensation owed to a reinstated VIA Rail employee by 40 per cent due to his failure to mitigate damages after being terminated for refusing to comply with the company’s COVID-19 vaccination policy.
On Jan. 24, 2022, VIA Rail terminated M.T., a 66-year-old locomotive engineer with over 46 years of service, due to his refusal to be vaccinated against COVID-19. In a prior arbitration award, the arbitrator found that VIA Rail’s termination of M.T.’s employment was disciplinary in nature and that the company failed to follow the mandatory process outlined in Article 16 of the collective agreement.
The arbitrator declared M.T.’s dismissal void and ordered his reinstatement. Following the reinstatement order, disputes arose regarding adjustments for the claim period between June 20, 2022, and April 23, 2023. The arbitrator was tasked with determining:
- Whether M.T. complied with his duty to mitigate damages by seeking alternative employment during the claim period.
- Whether the pension benefits M.T. received during this period should be deducted from the compensation owed to him.
- How interest on the compensation should be calculated.
Duty to mitigate damages
The arbitrator found that M.T. did not comply with his duty to mitigate damages, as he made no effort to seek alternative employment after his termination. M.T. argued that due to his age, specialized experience exclusively in the railway industry, and the context of the pandemic, he believed his chances of finding comparable employment were minimal.
However, VIA Rail provided evidence that the labour market during the claim period was favourable, with many positions available that M.T. could have pursued. The company submitted affidavits and expert reports indicating that other dismissed employees had successfully found alternative employment, even in positions that did not require specialized training.
The arbitrator stated, “It is evident that M.T. did not respect his duty to mitigate his damages. This duty applies to M.T. despite his years of service and his age.” The arbitrator emphasized that while employees are not required to accept any job that could cause them inconvenience or humiliation, they are expected to make reasonable efforts to find suitable employment.
As a result, the arbitrator reduced the compensation owed to M.T. by 40 per cent, citing previous cases where similar reductions were applied when employees failed to mitigate their damages.
Pension benefits
Regarding the pension benefits M.T. received during the claim period, the arbitrator concluded that these should not be deducted from the compensation owed. M.T. had begun receiving pension benefits of $4,650.18 per month after his termination. VIA Rail argued that since M.T. was receiving both his pension and, upon reinstatement, his salary, this resulted in a “double recovery” and that the pension benefits should offset the compensation.
The arbitrator referred to the Supreme Court of Canada’s decision in IBM Canada Limited v. Waterman, which held that pension benefits are a form of deferred compensation and should not be deducted from wrongful dismissal damages. The arbitrator stated, “His pension benefits do not constitute an indemnity for loss of income; they are rather a form of retirement savings.”
Interest calculation
The parties agreed that interest should be applied to the compensation owed to M.T., but they differed on the calculation method. The arbitrator adopted the method described in the Bohec decision, which calculates interest progressively, reflecting the fact that lost wages accrue over time rather than all at once. The arbitrator left it to the parties to apply this method in calculating the final amount owed.
The arbitrator concluded:
- M.T. did not fulfil his duty to mitigate damages, justifying a 40 per cent reduction in the compensation owed.
- The special agreement referenced (the “Entente spéciale”) had no impact on the calculation of the amount due.
- The pension benefits received by M.T. should not be deducted from the compensation.
- Interest should be calculated according to the method described in Bohec.
For more information, see Teamsters Canada Rail Conference v Via Rail Canada Inc., 2024 CanLII 114711 (CA SA).
Editor’s note: This article was written from an auto-translated version of this ruling, which was originally published in French. For specific details of this case, please refer to the original ruling.
