An arbitrator has directed Mount Royal University in Calgary to pay a lump-sum amount of $267,725 plus interest to a former faculty member after ruling that while there was just cause for discipline, the employer’s decision to terminate was “disproportionate.”
The arbitrator concluded that reinstatement was not viable and opted instead to award a monetary remedy based on what is commonly called the “Enhanced Common Law” approach.
Employment relationship ‘no longer viable’
At issue was how to properly calculate compensation for Dr W.’s loss of employment following a December 2021 termination. Dr W. had about 13.5 years of service and was 55 years old at the time of her dismissal. The termination, the arbitrator found earlier, was too severe. However, the arbitrator noted in the remedy decision that “the employment relationship has irretrievably broken down and is no longer viable.” As a result, the usual remedy of reinstatement was considered inappropriate.
Under section 142(2) of the Labour Relations Code and the collective agreement’s Article 20.3.7, the arbitrator has the authority to substitute a different penalty when termination is found to be excessive. The arbitrator’s decision explains that compensation in lieu of reinstatement aims to provide a fair and reasonable remedy in all the circumstances. “Selecting and applying the appropriate approach is not a scientific formula,” the arbitrator wrote.
Two approaches considered
Two main approaches were considered. The first, referred to as the “Fixed Term” approach, attempts to quantify future economic loss by projecting when the individual might have retired or otherwise left the position. This method often involves accounting for numerous contingencies and discounting the resulting amount substantially. According to the decision, such reductions have historically ranged from 80 per cent to 95 per cent due to the speculative nature of forecasting long-term employment outcomes.
The second, the “Enhanced Common Law” approach, calculates a lump-sum amount by analogizing the situation to a reasonable notice period under common law, then adds a multiplier to recognize the additional protections and benefits arising from the collective agreement. This method does not assume an indefinite or lengthy future service period and is considered simpler and less speculative.
Union’s position
The Faculty Association argued for the Fixed Term approach, suggesting that Dr W., who intended to work beyond 65, suffered a substantial long-term economic loss. Its actuarial report estimated losses ranging from $1.5 million (retirement at 65) up to $2.58 million (retirement at 75), not including potential increases in rank and other benefits. The Faculty Association proposed that no reductions be applied for contingencies or mitigation.
It also requested a 25 per cent top-up for lost collective agreement benefits, $2,500 for an alleged violation of academic freedom, $100,000 for alleged bad faith and reputational harm, tax gross-ups to offset lump-sum payment consequences, interest, and other forms of compensation.
University’s position
By contrast, the University advocated for the Enhanced Common Law approach, proposing a multiplier of 1.5 months per year of service. Using Dr W.’s monthly salary and benefits totalling approximately $13,221, this yielded about $267,725. The University pointed out that this figure exceeded what would be payable under the redundancy provisions of the collective agreement and was substantially more generous than common law notice alone would require.
It characterized the Faculty Association’s proposal as excessive and contended that the Fixed Term method would require significant discounts due to numerous uncertainties: “It is not clear why that is the only possible focus when considering an employment relationship which is no longer viable,” the University’s submission quoted, noting that both courts and arbitrators have accepted both methods in various circumstances.
Arbitrator chooses employer’s approach
The arbitrator agreed with the University’s approach, stating that the Enhanced Common Law methodology “is simpler because it does not involve identifying and speculating about the value of reducing future compensation for numerous contingencies.” The decision noted that the Fixed Term approach would require making “subjective speculations about contingencies” over many years, which arbitrators have found to be highly uncertain and prone to large, somewhat arbitrary discounts.
In rejecting the Fixed Term model in this instance, the arbitrator noted: “While the Fixed Term approach may theoretically be accurate … it is not the appropriate approach to use in Dr W.’s case.” The arbitrator agreed that numerous contingencies, including potential future discipline, retirement age uncertainty, health issues, or market changes, would require significant and subjective reductions: “All of the arbitrators who have used the Fixed Term approach have made significant reductions for contingencies.” Given the complexity and the speculative nature of those reductions, the arbitrator felt the Enhanced Common Law approach would produce a fairer, more reliable result.
The arbitrator also rejected the Faculty Association’s request for a 25 per cent increase for collective agreement benefits under the Fixed Term scenario, calling it conceptually unjustified. Further, claims for academic freedom violations, bad faith, or loss of reputation were not accepted, as they were not pleaded in the original grievances and “no evidence was led about either of these” at the arbitration hearing.
Similarly, the arbitrator declined the Faculty Association’s requests for union dues recovery and a public statement from the University. “There is no labour relations purpose in perpetuating the debate,” the decision states, adding that Dr W. had been active in disseminating information about the arbitration on her own.
In a related matter, the arbitrator accepted the University’s agreement to pay $4,509.82 plus interest for a May 2021 suspension that had been replaced with a letter of reprimand in the original award. This amount corresponds to two weeks of withheld salary. However, the arbitrator declined to order the University to gross up the payment for potential income tax effects. The employer was directed to structure the final award, if requested by Dr W. in writing, to minimize tax liabilities within the bounds of applicable legislation.
On timing, the arbitrator held that these amounts should be calculated from the date of Dr W.’s termination in December 2021, with pre-judgment interest applying until the date of the remedy award. Post-judgment interest would apply if the University fails to pay within 60 days. While the arbitrator noted the unusual nature of granting payment in lieu of reinstatement rather than awarding back pay and returning the grievor to work, the decision emphasized that each case must be assessed on its own facts: “I emphasize … it is not a scientific formula.”
The final order directs the University to pay Dr W. $267,725 plus pre-judgment interest and $4,509.82 plus pre-judgment interest, with conditions for payment and potential structuring for tax purposes. All other claims advanced by the Faculty Association and Dr W. were dismissed. The arbitrator reserved jurisdiction to address any issues arising in the implementation of the remedy.
For more information, see Board of Governors of Mount Royal University v Mount Royal Faculty Association, 2024 CanLII 119283 (AB GAA).
