No Just Cause to Dismiss Bank Manager, but Reinstatement was Inappropriate

Under the Canada Labour Code, it is possible for an employee of a Federally-regulated undertaking, such as a bank, to seek reinstatement for dismissal under certain circumstances.  This is a rare remedy for non-unionized employees.  I made an entry about this in October 2011, noting that, while managers are usually not able to seek reinstatement, bank managers aren't necessarily 'managers' for the purpose of the Code.

The Federal Court of Appeal recently released a decision in a similar type of case, Payne v. Bank of Montreal, where Mr. Payne - a branch manager in Woodstock, Ontario - was dismissed for cause, but the dismissal was overturned by an adjudicator on an unjust dismissal complaint.  The Federal Court of Appeal upheld the finding that there was not just cause (though this appears to have been somewhat reluctant), but found that the reinstatement was unreasonable.

The Facts

Mr. Payne became the Woodstock branch manager in April 2007.  In October 2008, he received corrective action relating to complaints from five of his ten employees, including "angrily shouting; demeaning them in front of colleagues and customers; questioning an employee about the nature of a medical appointment...; and commenting on the personal appearance of two employees."  The discipline he received was at the highest level short of dismissal, and then other issues came to light.

In early November, 2008, BMO investigated a complaint by his assistant branch manager, Ms. Carter, that he was 'stalking' her following the end of an affair.  At the first interview, he denied having had a personal relationship; in a subsequent interview, he admitted having had a sexual relationship with her.  As well, it appears that he had disclosed to Carter information about the first investigation which was supposed to be confidential.

On November 20, 2008, Mr. Payne was dismissed for cause, for breaching confidentiality of the first investigation, acting inappropriately on bank premises during and outside business hours, failing to meet expectations from October's corrective letter, and breaching the employer's code of ethics.

Procedural History

The adjudicator found misconduct in the breach of confidentiality and the initial lie about his relationship with Ms. Carter.  (Shades of the Reichard case?)  However, while disciplinable, these were not "overly serious".

It appears that there was evidence that one male employee in the office was aware of the relationship, but no evidence that other employees, or members of the community, were aware, and no reason to believe that there was any inappropriate pressure exerted by Mr. Payne which would breach the bank's anti-harassment policy.  The relationship was "reckless in the extreme", but the bank suffered no harm as a result.

Altogether, this did not constitute just cause:  It was a relationship between two consenting adults, with no inappropriate pressure or abuse, and which had not caused any adverse effects on the workplace.  Progressive discipline, in the adjudicator's view, would have been sufficient to cause Mr. Payne to reflect on his conduct and act more appropriately in the future.

On judicial review, the Federal Court found that the adjudicator had: failed to consider the cumulative effect of the conduct for which he was dismissed with the other misconduct for which he was disciplined earlier; failed to appropriately weigh the risk of harm even in the absence of actual harm (and also failed to consider the actual harm associated with loss of productivity when the relationship was carried on during the business day); and failed to explain how conduct he characterized as reckless, foolish, and dangerous was consistent with maintaining the employment relationship.

In the alternative, the judge concluded that the decision to reinstate was unreasonable, because his misconduct had destroyed the trust and confidence required of a manager.

The Federal Court of Appeal's Decision

Let me draw a quick excerpt from near the end of the decision:

 It may seem surprising that the facts of the present case would not have been found to warrant dismissal for cause. However, this is a question that Parliament has committed to the Adjudicator. It is not the function of a reviewing court to substitute its view of the merits of a dispute for that of an Adjudicator. The court is limited to the residual role of ensuring that the reasons given by the Adjudicator justify the outcome, and demonstrate that it falls within the range of acceptable outcomes. That range may well include a decision that appears “counter-intuitive” (Newfoundland Nurses, at para. 13) to the non-specialist.

So the adjudicator's decision that there was not just cause is "surprising" and "counter-intuitive", but not unreasonable to the point of warranting judicial intervention.  A sexual relationship, in and of itself, doesn't warrant dismissal for cause without other contextual elements.  While the context - the other disciplinary matters - are serious, the adjudicator did consider the overall effect of the various disciplinary issues, and was entitled to deference in his finding that, even combined, they did not amount to just cause for dismissal.

However, the reinstatement remedy was another matter.  Reinstatement is discretionary upon the adjudicator, but it is favoured by adjudicators barring exceptional circumstances.  The adjudicator in this case awarded reinstatement on the basis that the employer had not established that reinstatement was "unrealistic".  The Court of Appeal concluded that this was the wrong question.  The adjudicator should have asked:  "could the employer ever have confidence in the employee's judgment again, such that it should be prepared to run the risk of further misconduct?"

His position had been filled (by a person with many more years of service than him), his performance was not "particularly good", he had poor relations with his superiors, and he had attempted to revive his relationship with Ms. Carter even after receiving the prior discipline.  Accordingly, the Court of Appeal concluded that the employer could no longer have trust and confidence in him as a manager.

My Thoughts

I find it quite interesting that, while unwilling to intervene in the adjudicator's finding on just cause, and acknowledging a broad discretion on the adjudicator to determine the remedy (including reinstatement), the Court draws the line at that point.

What I find even more interesting is that the analysis as to why reinstatement was inappropriate looks very similar to the analysis typically used by the Courts to determine just cause.

I think this is a difficult decision to reconcile, for that reason.  His misconduct was such that the employer could no longer have the necessary faith in him to continue the employment relationship, but not such that it amounted to just cause.  I could easily understand a decision either way on just cause (and, accordingly, the Court's decision to defer is probably the right one), but it seems difficult to me that the Court, having acknowledged that the arbitrator was entitled to find that the misconduct didn't rise to the level of just cause as set out in McKinley, concluded that it was unreasonable to expect the employer to continue employing him.

It may force adjudicators to apply a more detailed analysis to their awards of reinstatement, but I don't think it will have a significant impact:  As this is a rather odd outcome, I don't expect adjudicators to often reach the same decision, that misconduct does not rise to just cause, but nonetheless warrants a loss of confidence incompatible with continuing the employment relationship.

(As well, I think there's a conceptual challenge in looking at the trust and faith necessary for a manager, in context of an unjust dismissal complaint seeking a remedy not open to 'managers'.)

With the growing issues of 'personal harassment' in the workplace, however, I think it's important to highlight the analysis of the sexual relationship.  Most harassment policies do not expressly prohibit sexual relationships between co-workers.  What they prohibit is typically more along the lines of 'sexual advances that are known or ought reasonably to be known to be unwelcome'.  As well as unwelcome advances by a person in a position to confer a work-related benefit.  So the fact of a sexual relationship between co-workers, or even in a supervisor/subordinate relationship, is not in and of itself misconduct.  However, the supervisor/subordinate relationship is 'risky' and must be carried out with the utmost discretion, without favouritism, and with caution on the part of the supervisor to avoid exploiting his/her power.  (In general, the better advice to people considering a relationship with a subordinate is this:  Don't do it.)

*****

This blog is not intended to and does not provide legal advice to any person in respect of any particular legal issue, and does not create a solicitor-client relationship with any readers, but rather provides general legal information. If you have a legal issue or possible legal issue, contact a lawyer.