Potter v. The Crown in Right of Ontario (Ministry of Community Safety and Correctional Services), 2019 CanLII 35320

PSGB# P-2017-0258

IN THE MATTER OF AN ARBITRATION

Under

THE PUBLIC SERVICE OF ONTARIO ACT

Before

THE PUBLIC SERVICE GRIEVANCE BOARD

BETWEEN

Potter

Complainant

• and -

The Crown in Right of Ontario (Ministry of Community Safety and Correctional Services)

Employer

BEFORE

Andrew Tremayne

Vice-Chair

FOR THE COMPLAINANT

Jessica Greenwood Raven, Cameron, Ballantyne & Yazbeck LLP Counsel

FOR THE EMPLOYER

Jonathan Rabinovitch Treasury Board Secretariat Legal Services Branch Counsel

SUBMISSIONS

January 22 and February 1, 2019

DECISION

1Mr. Potter’s employment was terminated on March 9, 2017 after an investigation into an incident that occurred at the Quinte Detention Centre on December 24, 2015. In a decision dated October 2, 2018, the Board found that the penalty of discharge for his role in the incident was excessive. The employer was directed to reinstate Mr. Potter and to pay him compensation from the date six months after his discharge until he was reinstated. In effect, the Board substituted a six–month unpaid suspension for his termination.

2The parties agree that Mr. Potter made reasonable efforts to mitigate his damages prior to his reinstatement and that he earned some income from alternate sources. He also incurred legal fees in connection with the litigation of his complaint that are in excess of the amount of that income. The parties disagree about how, if at all, the legal fees should be treated when the total amount of compensation is calculated.

3Very briefly stated, counsel for Mr. Potter takes the position that his earnings from alternate sources should not be deducted from the compensation to be paid to him by the employer, on the basis that his legal fees exceed the amount earned from his mitigation efforts. Having been reinstated, Mr. Potter should not be any better or worse off (aside from the 6 month suspension) than if he had not been discharged, and he should be allowed to put his earnings from alternate sources towards his legal fees rather than have them deducted from the compensation which is to be paid to him by the employer.

4Counsel for the employer disagrees, and argues that this is simply a disguised effort to persuade the Board to award legal costs to Mr. Potter, something that the Board has declined to do in all but the most exceptional circumstances. Awards of costs have been reserved for the most egregious examples of employer misconduct, which is not the case here.

5For the reasons set out below, I find that it would not be appropriate in this case to apply the amount earned by Mr. Potter in mitigation of his damages towards his legal fees. In other words, the Board’s usual approach should be followed, and his legal costs should not be taken into account when his earnings from alternate sources are deducted from the amount of compensation to be paid to him by the employer.

The Parties’ Submissions

6Mr. Potter argues that this is not an attempt to obtain an award of costs. Rather, this is an appropriate application of the basic principles of the duty to mitigate: a successful party should be put in as good a position as they would have been if the employer had not terminated their employment, subject to the qualification that the successful party is expected to take steps to avoid losses (or “run up” their damages). This is the general approach endorsed by the Supreme Court of Canada in Red Deer College v. Michaels, 1975 CanLII 15 (SCC). In this case, the employer should not benefit from Mr. Potter’s mitigation efforts while at the same time expecting him to absorb the costs of litigation. Mr. Potter should first be allowed to apply his mitigation income towards his legal fees. Any remaining income, or surplus, should be offset against the retroactive pay coming from the employer. This accords with the basic principles of mitigation and more closely puts Mr. Potter in the same situation he would have been in but for the termination of his employment.

7Mr. Potter also submits that the Federal Court of Appeal has endorsed the principle that an arbitrator’s power to award equitable relief under the Canada Labour Code, R.S.C. 1985 includes the power to award costs. The Court has also noted that an award of retroactive compensation which is gained at some considerable expense to the employee does not have the effect of making the employee whole (Banca Nazionale Del Lavoro of Canada Ltd. v. Lee-Shanok (F.C.A.), [1988] F.C.J. No. 594). This and the decision in Wolf Lake First Nation v. Young, 1997 CanLII 5057 (FC), [1997] F.C.J. No. 514 speak to that fact that legal costs effectively reduce the compensation for lost remuneration, which should be avoided.

8To summarize, Mr. Potter is not asking for an award of legal costs; he is asking that the Board recognize the reality of the situation, namely that Mr. Potter incurred significant costs in advancing his complaint and having his discharge rescinded. The Employer's approach, where they reap the benefits of Mr. Potter's mitigation efforts while the legal costs that he incurred as a result of the discharge are ignored, is not a fair and balanced approach.

9The employer submits that the issue of whether costs should be ordered has been litigated at the Board many times. The Board has said that while costs are generally awarded to successful parties in Court, they are not normally awarded by administrative tribunals or arbitrations of employment matters in Ontario, either based on jurisdiction or as matter of practice. This was first stated in Cardoza v. Ontario (Community Safety and Correctional Services) P-2009-1510 and then reiterated in Wallace v. Ontario (Community Safety and Correctional Services), 2015 CanLII 32427.

10The employer conceded that although there is support in the arbitral jurisprudence for the principle that expenses incurred in mitigation of damages can be offset, those expenses must be directly connected to the efforts to obtain alternate employment. Legal costs related to the litigation of a claim for reinstatement are treated separately and are not considered to be part of the mitigation efforts.

Analysis and Findings

11First, I turn briefly to the submission that the Federal Courts have endorsed the principle that an arbitrator’s power to award equitable relief includes the power to award costs under the Canada Labour Code. The adjudicator's jurisdiction in respect of remedies is provided for in subsection 242.(4) of the Code:

(4) Where an adjudicator decides pursuant to subsection (3) that a person has been unjustly dismissed, the adjudicator may, by order, require the employer who dismissed the person to

(a) pay the person compensation not exceeding the amount of money that is equivalent to the remuneration that would, but for the dismissal, have been paid by the employer to the person;

(b) reinstate the person in his employ; and

(c) do any other like thing that it is equitable to require the employer to do in order to remedy or counteract any consequence of the dismissal.

12In Banca Nazionale Del Lavoro of Canada Ltd. and Wolf Lake First Nation the Federal Courts specifically identified the adjudicator’s broad powers in subsection 242.(4)(c) to order an employer to “do any other like thing that it is equitable to require the employer to do in order to remedy or counteract any consequence of the dismissal” as the source of the adjudicator’s power to award legal costs. Neither the Public Service of Ontario Act nor Regulation 378/07 from which this Board derives its jurisdiction and powers have similar language so this point is of little assistance to the Board.

13Second, in Cardoza, the complainant argued that he had been forced to leave a poisoned workplace, although he had returned to work by the time the matter came before the Board. The issue was therefore whether the employer had breached his contract of employment during the sequence of events preceding his return. The Board upheld his complaint, finding that the employer had breached its duty of fairness to Mr. Cardoza. Counsel in Cardoza also urged the Board to award costs as part of a “make whole” remedy. It was argued that both the complainant and his counsel had tried to avoid litigation, but that unnecessary delays and intransigence by the employer had created a situation where there was no viable option other than to litigate the matter.

14The Board addressed the question of remedy, including whether to award costs, and dealt squarely with the matter of the complainant’s mitigation efforts at paragraph 141 of its decision:

Costs are generally awarded to the successful party in Court actions, but have not generally been awarded by administrative tribunals or arbitrators in employment matters in Ontario, either on the basis of lack of jurisdiction, or as a matter of practice. A practice which does not award costs as a matter of course has the feature that unsuccessful grievors and applicants do not generally face the prospect of paying the legal costs of the successful party, something that makes administrative tribunals more accessible than the Courts. Although the decisions in Callaghan and Girling v. Ontario (Ministry of the Solicitor General and Correctional Services), 2002 CanLII 45638 (ON PSGB) P/0013/98 are examples of cases where the Board has awarded costs, more recent cases have not done so, including Charlton, where the Board reiterated that awards of cost would be reserved for the most egregious examples of employer misconduct.

15I accept that the argument in Cardoza with respect to legal costs was not advanced in precisely the same way as it has been framed by counsel for Mr. Potter; namely that the Board should look at legal costs as part of the overall examination of mitigation efforts and not as a separate item. Nevertheless, the Board in Cardoza rejected virtually the same argument that is being made here, namely that if a complainant has a significant legal bill to pay, he is not “made whole” and that costs should be ordered as part of a “make-whole” remedy. The Board also accepted that although much could have been done by the employer in responding to Mr. Cardoza’s situation that would have made litigation unnecessary, it was not a case of egregious misconduct. For that and other reasons, the Board declined to award costs. No allegation of similar conduct on the part of the employer is being made by Mr. Potter.

16Despite the relatively small number of decisions by the Board that have directly addressed the issue of legal costs, the approach has been clear and consistent. That is, awards of cost are be reserved for the most egregious examples of employer misconduct. While the Board is not necessarily obliged to follow prior decisions, it is generally accepted that where the issue is similar, an earlier decision should be followed for the sake of consistency and predictability. As a result, even accepting that the application of the Board’s established practice with respect to the treatment of legal costs results in a monetary shortfall for Mr. Potter and that he will not be in exactly the same position he would have been (apart from the 6 month unpaid suspension) if his employment had never been terminated, it would not be appropriate for the Board to award costs in the circumstances of this case.

17The excerpt from Cardoza set out above also highlights another very important consideration: legal costs are different from damages. Courts (and parties to a Court action) treat them quite separately, and they are subject to very different considerations.

18The principles of mitigation of damages in the employment context, and as set out in Red Deer College and elsewhere, come down to the proposition that the employer should not be responsible for avoidable losses. Costs generally “follow the cause” although other considerations have been introduced, including but not limited to: the encouragement of settlement, the prevention of frivolous or vexatious litigation, and the discouragement of unnecessary steps in proceedings. In the Province of Ontario, costs can be assessed, but they are usually fixed at the discretion of the Court, and a number of factors may be taken into account. The current system uses three scales: partial indemnity, substantial indemnity, and full indemnity. All this to say that legal costs and mitigation are separate categories: they are two very different things and each is subject to very different legal considerations.

19The remedy requested by counsel for Mr. Potter would blur the very clear distinction between these two categories. The compelling policy and other reasons for not doing so have been amply articulated by the Board in its previous awards and by the employer in this matter.

20In all these circumstances, the Board declines to award costs.