Arbitrator Orders Employer to Pay over $500,000 for Bad Faith Termination

/in /by

In Greater Toronto Airports Authority v. Public Service Alliance of Canada, Local 0004,

Arbitrator Owen Shime ordered the GTAA to pay over $500,000 in damages for its bad faith conduct in wrongfully terminating a unionized employee for suspected abuse of sick leave.

The grievor had worked for the GTAA for over 23 years, and had no disciplinary record. After a workplace injury, she underwent knee surgery and told her employer that she required four weeks’ sick leave to recover.

During this time, the grievor resided with another GTAA employee who was under surveillance for an unrelated issue. Upon viewing the surveillance, it appeared that the grievor did not have any problem with her knee, which caused the employer to question the legitimacy of her absence and to request further information from her surgeon.

When the grievor returned to work and displayed a limp that had not been present in the video surveillance footage, the employer’s suspicions that the grievor’s leave had been fraudulent increased. The employer met with the grievor and concluded that she had been dishonest in reporting that her injuries required time off and that she had continued to be dishonest when questioned. As a result, the grievor was terminated because of loss of trust.

Arbitrator Shime allowed the grievance and concluded that the GTAA had failed to prove that the grievor had dishonestly claimed sick leave benefits, and that her termination was therefore unreasonable.

In his decision, the arbitrator stated that the employer had an implied obligation to act in good faith with respect to the administration of the collective agreement. He went on to find that, in this case, the GTAA’s conduct was so egregious as to constitute bad faith. Specifically, the arbitrator criticized the employer for:

  • terminating the grievor prematurely and without conducting a full investigation;
  • failing to properly consider the evidence before it with an open mind;
  • not obtaining medical corroboration of its suspicions before terminating the grievor; and
  • not considering a lesser penalty, given the grievor’s long service and discipline-free record.

The arbitrator ordered that the incident be removed from the grievor’s file, that the GTAA be prohibited from discussing the matter, and that a positive letter of reference be provided to the grievor. He also awarded damages totalling $500,000, including damages for past and future loss of income until the date the employee would likely have retired, mental distress damages, and punitive damages. Notably, with respect to damages for the loss of future earnings, Arbitrator Shime stated the following (at page 116):

“…there is an obligation on the employer not to conduct itself, without reasonable or proper cause, in a manner calculated and likely to destroy or seriously damage the relationship of confidence and trust between employer and employee.”

In this case, the arbitrator found that the employer’s “high-handed, arbitrary and capricious” conduct destroyed the relationship of trust between the employer and the grievor such that this obligation was not met, and compensation in lieu of reinstatement was provided to the grievor.

This decision confirms that arbitrators will order significant monetary awards where employers have acted in bad faith. In order to avoid such an award, an employer should carefully consider its course of action before terminating an employee. Suspicions should be verified and corroborated by a professional, where applicable. Consideration must also be given to the employee’s past service and disciplinary record in determining the appropriate penalty.

The GTAA has applied for judicial review of this decision. We will keep readers updated on the status of the application.