Saskatchewan Polytechnic (SP) has failed in its attempt to overturn an arbitrator’s decision that granted severance pay to two employees who accepted reassignment before a key legal interpretation was changed.
The King’s Bench for Saskatchewan ruled that the arbitrator’s decision was reasonable, finding that the employees were entitled to severance despite having initially accepted new roles.
Background and arbitration decision
The case involved two long-term employees who were reassigned by SP in 2021. At the time, an existing court ruling supported SP’s position that reassigned employees were not entitled to severance under the collective bargaining agreement (CBA). The grievors accepted the reassignment and subsequently retired within a year.
However, in March 2022, the Saskatchewan Court of Appeal overturned that earlier decision, ruling that severance was indeed an option for reassigned employees. The grievors filed grievances, arguing they should have been offered severance at the time of reassignment. The arbitrator ruled in their favour, determining that they were entitled to severance without deductions for wages earned post-reassignment.
SP challenged this ruling, arguing that the arbitrator’s reasoning was flawed and that the grievances were untimely. The employer also contended that any severance award should be reduced by the wages the grievors earned between reassignment and retirement.
Judicial review and standard of reasonableness
The court reviewed the arbitrator’s decision under the reasonableness standard established in Canada (Minister of Citizenship and Immigration) v Vavilov. SP argued that the arbitrator misapplied legal principles, including the interpretation of the CBA, discoverability, and the calculation of severance.
The court upheld the arbitrator’s decision, finding that the reasoning was internally coherent and justified in light of the legal and factual constraints. While the arbitrator’s analysis of retroactivity and contractual interpretation could have been more robust, the court found the conclusion was reasonable: “The grievors were denied rights they always had.”
Did reassignment preclude severance?
A central issue was whether the grievors’ acceptance of reassignment barred them from claiming severance later. SP maintained that the employees had voluntarily accepted reassignment and never engaged with the severance provisions of the CBA.
The court disagreed, applying the principle of common mistake. At the time of reassignment, both the employer and employees operated under a mistaken legal interpretation that severance was not an option. The court ruled that this mistake was fundamental and went to the root of the agreement: “Had severance been available, they would not have accepted their reassignment.”
As a result, the grievors’ acceptance of reassignment was deemed void, allowing them to retroactively claim severance.
Timeliness of grievances
SP challenged the grievances on timeliness grounds, arguing that they were filed outside the 30-day window set by the CBA. The arbitrator had ruled that the grievances were timely because the limitation period only began when the Court of Appeal issued its ruling clarifying severance eligibility.
Both parties agreed this approach was incorrect, as the limitation period should have been assessed using discoverability principles.
However, the arbitrator had also exercised discretion under s. 6-49(3)(f) of The Saskatchewan Employment Act (SEA) to relieve against the time limits, citing “highly unusual circumstances.” The court found this use of discretion reasonable, emphasizing that the employer was aware of the ongoing legal uncertainty and the potential implications of the Court of Appeal ruling.
Severance calculation: Should earnings be deducted?
SP further argued that any severance award should be offset by wages the grievors earned post-reassignment, drawing on principles of mitigation in wrongful dismissal cases.
The court rejected this argument, emphasizing that severance under the CBA was not compensatory damages for wrongful dismissal but a contractual benefit meant “to ease the effects of involuntary separation.”
Unlike wrongful dismissal damages, severance was not tied to a duty to mitigate. The court found that had the grievors taken severance and worked elsewhere, their earnings would not have been deducted. As such, the same principle applied to their continued employment at SP.
Conclusion
The court dismissed SP’s application for judicial review, affirming the arbitrator’s decision in full. The ruling confirms that employees reassigned under mistaken legal interpretations of severance eligibility can later claim severance if the law is clarified in their favour. Additionally, it underscores that severance entitlements under a CBA are distinct from wrongful dismissal damages and are not subject to mitigation principles.
For more information, see Saskatchewan Polytechnic v Saskatchewan Polytechnic Faculty Association, 2025 SKKB 36 (CanLII).
