Royal Bank of Canada v. Lapointe, 2005 FC 633

Date: 20050505

Docket: T-1037-04

Citation: 2005 FC 633

Ottawa, Ontario, May 5, 2005

PRESENT: THE HONOURABLE MR. JUSTICE BEAUDRY

BETWEEN:

                                                     ROYAL BANK OF CANADA

                                                                                                                                            Applicant

                                                                           and

                                                              SILVY LAPOINTE

                                                                                                                                        Respondent

                                            REASONS FOR ORDER AND ORDER

[1]                This is an application for judicial review under section 18.1 of the Federal Courts Act, R.S.C. 1985, c. F-7 of a decision of an adjudicator, Bruno Leclerc, dated April 26, 2004, in which he dismissed the applicant's exception to dismiss the respondent's complaint under paragraph 242(3.1)(a) of the Canada Labour Code (the Code). The applicant submitted that the respondent had been laid off, as opposed to dismissed. The adjudicator allowed the respondent's unjust dismissal complaint under section 240 of the Code and ordered that she be reinstated in her position and paid compensation for lost wages.

ISSUES

[2]                The issues in dispute are as follows:

1.         Did the adjudicator err in finding that the employee had not been laid off because of a lack of work or the discontinuance of a function within the meaning of subsection 242(3.1) of the Code?

2.         Did the adjudicator make a patently unreasonable error in finding that the respondent had been unjustly dismissed?

[3]                For the reasons that follow, I would answer the first question in the affirmative. Since I would allow the application for judicial review, there is no need to address the second question.

FACTS

[4]                The respondent was employed by the applicant from August 15, 1977, to October 30, 2001. During those years, she held a variety of positions and worked in a number of different branches.

[5]                Between December 1999 and the end of June 2000, the applicant closed four branches in the Saguenay-Lac Saint Jean region. During that same period, certain administrative functions formerly carried out in the branches were centralized in Montréal. As part of a vast nation-wide initiative called "Service Delivery", the applicant transferred functions formerly performed in the branches to its main administrative centres. These operational changes resulted in the lay-off of 42 employees in the Saguenay-Lac Saint Jean region. The least productive employees were laid off. Because of the numerous changes, the respondent's duties were revised, and her position title changed.   

[6]                In September 2001, the applicant informed Ghislain Bouchard, Regional Director, Saguenay- Lac Saint Jean that it was going ahead with another initiative, called "Sales Structure Realignment" or "Function Realignment", which was designed to establish a standardized Canada-wide model allowing branches to offer the same services to clients and promote strong growth in revenues. The initiative required a reassessment of the hours worked by full-time employees (FTEs).

[7]                Mr. Bouchard was instructed to reduce the number of hours worked by the employees in his region by 205.5 hours per week, or 5.48 FTEs. The authorized allocation of human resources was accounted for in terms of hours worked, not the number of employees. One FTE equals 37.5 hours per week. Because of the Function Realignment, the Chicoutimi branch, where the respondent worked, was downgraded a category from Large Unit (b) 32-35 FTEs to Large Unit (a) 21.5- 32 FTEs. This had the effect of reducing the authorized hours of work from 1,215.5 hours per week (32.41 FTEs) to 1,035.75 hours per week (27.62 FTEs).

[8]                To achieve this reduction at the Chicoutimi branch, a position slated to be filled because of the closure of another branch was instead eliminated from the budget (1 FTE), the position of Branch Director, Chicoutimi was merged with the Regional Director's position (1 FTE), and two vacant part-time positions were abolished (0.88 FTEs). To attain its objective, the applicant also had to lay off the respondent (0.89 FTEs) and another employee, Johanne Hudon (1 FTE). To reach the set target of 5.48 FTEs, Mr. Bouchard also laid off an employee at another branch.

[9]                Since the Function Realignment was going to require changes in the organization of work and the division of responsibilities, the criterion used by the applicant to decide which two employees would be laid off was adaptability to change. After consultations with the two assistant directors, it was agreed that the employees who were having the greatest difficulty adapting to the changes introduced by the nation-wide Service Delivery initiative were the respondent and Ms. Hudon. Ms. Hudon left voluntarily in exchange for a severance package. The respondent was also entitled to receive a severance package equal to 72 weeks' pay, plus 15% as compensation for lost fringe benefits.

[10]            Since laying off the respondent, the applicant has not hired any more regular employees, be it on a full-time or part-time basis.

IMPUGNED DECISION

[11]            In the matter of the respondent's unjust dismissal complaint under subsection 242(3) of the Code, the adjudicator started off by considering whether the lay-off was the result of a lack of work or the discontinuance of a function within the meaning of subsection 242(3.1) of the Code or whether this was merely a ploy to dismiss the complainant. The adjudicator found that the Function Realignment program did not require laying off the respondent, since her position had not been abolished after her departure, thus making the decision to terminate her employment an arbitrary one.

[12]            Consequently, the adjudicator ordered the applicant to reinstate the respondent and pay her compensation for lost wages dating back to her dismissal.

RELEVANT LEGISLATIVE PROVISIONS

[13]            The relevant legislative provisions are set out in an appendix to this decision.

ANALYSIS

Standard of review

[14]            The preliminary step in considering an application for judicial review involves determining the appropriate standard of review. In Law Society of New Brunswick v. Ryan, [2003] 1 S.C.R. 247, the Supreme Court of Canada held that there are three standards of review: correctness, reasonableness simpliciter, and patent unreasonableness. The three standards of review differ in the degree of deference the reviewing court must apply.

[15]            In St. Lawrence Seaway Management Corporation v. Bourgeois, [2003] F.C.J. No. 1433 (T.D.) (QL) at paragraph 17, the Federal Court stated that the standard of review applicable to a decision concerning subsection 242(3.1) is correctness:

Concerning the application of subsection 242(3.1) of the Code, the standard of review, as the parties themselves acknowledge, is absence of error or correctness, since this is a statutory provision that limits the powers and authority of the adjudicator. It should suffice, in this regard, to refer as well to the following cases: Union des employés de service, local 298 v. Bibeault, [1988] 2 S.C.R. 1048, Canada Post Corporation v. Pollard, [1994] 1 F.C. 652 (C.A.), Byers Transport Ltd. v. Kosanovich, [1995] 3 F.C. 354 (C.A.), Beothuk Data Systems Ltd., Seawatch Division v. Dean, [1996] 1 F.C. 451 (T.D.), Moricetown Indian Band v. Morris and Dennis (1996), 120 F.T.R. 162 and Rogers Cablesystems Ltd. v. Roe (2000), 193 F.T.R. 240.

[16]            In Canada Post Corporation v. Pollard, [1994] 1 F.C. 652 (C.A.) at paragraphs 30 and 34, cited by the Federal Court of Appeal, a pragmatic and functional approach was applied:

After considering what it is the Adjudicator is called upon to decide in the present case, his limited area of expertise, the wording and interrelationship of the enactments at issue, the absence of specific powers to deal with the question when compared to other decision-makers under the Code and notwithstanding the privative clause, I am unable to find a legislative intent to entrust the Adjudicator with the jurisdiction to determine virtually unchecked whether the complainant was amongst those entitled by Parliament under paragraphs 240(1)(b) and 242(3.1)(b) to make a complaint. The fact that Parliament has left untouched any civil remedy of an employee against his employer (subsection 246(1)) is no reason, in my view, to have a decision depriving the employee of the easier, quicker and less costly administrative remedy to which he would be entitled should the legislation be correctly interpreted, subject to review only if that decision was patently unreasonable.

. . .

I have come to the conclusion that the appropriate test for judicial review, in this case, as well, is that of correctness.

[17]            With regard to the second issue in dispute, I am of the view that the appropriate standard of review is patent unreasonableness. Since the Federal Court of Appeal's recent decision in Davies v. Canada (Attorney General), [2005] F.C.J. No. 188 (F.C.A.) (QL), it has been up to the Court to apply the pragmatic and functional approach when no previous case has done so:

Rather than performing his own pragmatic and functional analysis, the applications judge relied solely on prior case law to determine the appropriate standard of review. Neither of the cases which form the basis of the applications judge's determination of the standard of review of the Appeal Board's decision apply the pragmatic and functional approach. Consequently, it is appropriate for this Court to apply the pragmatic and functional approach to determine the correct standard of review and, if necessary, to assess the Appeal Board's decision on that basis. (paragraph 9)

[18]            To determine the appropriate standard of review, the Court must conduct this analysis as prescribed in Dr. Q. v. College of Physicians and Surgeons of British Columbia, [2003] 1 S.C.R. 226 at paragraph 26:

In the pragmatic and functional approach, the standard of review is determined by considering four contextual factors - the presence or absence of a privative clause or statutory right of appeal; the expertise of the tribunal relative to that of the reviewing court on the issue in question; the purposes of the legislation and the provision in particular; and, the nature of the question - law, fact, or mixed law and fact. The factors may overlap. The overall aim is to discern legislative intent, keeping in mind the constitutional role of the courts in maintaining the rule of law.

[19]            In the case at bar, the existence of a privative clause, the adjudicating tribunal's expertise in determining if there has been unjust dismissal, the purpose of the statute and provisions concerned, i.e., resolving disputes between parties, and the factual nature of the question raised all point toward the patent unreasonableness standard of review.

Did the adjudicator err in finding that the employee had not been laid off because of a lack of work or the discontinuance of a function within the meaning of subsection 242(3.1) of the Code?

[20]            Subsection 242(3.1) expressly provides that an adjudicator does not have jurisdiction to render a decision on a dispute if the employee was laid off because of a lack of work or the discontinuance of a function. The meaning of "discontinuance of a function" was defined by the Supreme Court of Canada in Flieger v. New Brunswick, [1993] 2 S.C.R. 651 at pages 663 and 664:

How then should "discontinuance of a function" be defined? "Discontinuance" obviously refers to the termination of something that is termed a function. A "function" must be the "office" that is to say the bundle of responsibilities, duties and activities that are carried out by a particular employee or group of employees.

It is this definition of "function", in the sense of "office" which best comports with the environment of the work place. The very word "employment" indicates the existence of an employee and an employer. A term such as "function" or "office" must have a meaning for both these parties. For example, a person may have the "office" of plant superintendent. A person functioning as a plant superintendent carries out a regime or set of activities and duties that forms the office of plant superintendent. Both the employer and the employee understand what is required in order to perform or to carry out that particular office. Similarly the "office" of secretary or punch press operator carries with it a particular set of activities and duties. A particular bundle of skills is required to perform the duties and activities required by each of these offices. Once again both the employer and employee will know exactly what is required to perform the activities of the particular office.

Therefore, a "discontinuance of a function" will occur when that set of activities which form an office is no longer carried out as a result of a decision of an employer acting in good faith. For example, if a particular set of activities is merely handed over in its entirely to another person, or, if the activity or duty is simply given a new and different title so as to fit another job description then there would be no "discontinuance of a function". On the other hand, if the activities that form part of the set or bundle are divided among other people such as occurred in Mudarth,supra, there would be a "discontinuance of a function". Similarly, if the responsibilities are decentralized, as happened in Coulombe, supra, there would also be a "discontinuance of a function".

[21]            Létourneau J.A. wrote the following on this subject in Atomic Energy of Canada v. Jindal, [1998] F.C.J. No. 847 (F.C.A.) (QL) at paragraph 15: "[A] 'discontinuance of a function' occurs not only when a function is no longer carried out but also when the activities that form part of a bundle of activities are divided amongst other people".

[22]            The expression "lack of work", meanwhile, was defined by O'Keefe J. in Howard v. Maritime Telephone and Telegraph Co. Ltd., [2000] F.C.J. No. 1758 (T.D.) (QL) at paragraph 25:

The term "lack of work" is a relatively straightforward term and budget constraints or downsizing in response to economic pressures in response to which the employer determines that the work currently being performed can be performed by fewer employees.

[23]            The respondent argues that the adjudicator correctly decided that the evidence of "discontinuance of a function" was inconclusive and consequently was correct in finding that she had been unjustly dismissed. She also argues, however, that even if the Court were to find discontinuance of a function, the adjudicator was correct in concluding that the choice of who to lay off was made in an arbitrary manner without any objective basis.   

[24]            The applicant, meanwhile, submits that the adjudicator erred in finding that there had been no discontinuance of a function. It argues that this was, in fact, a lay-off, and that the adjudicator committed a reviewable error by interfering with management's rights and substituting his own selection criteria for the applicant's legitimately chosen criterion, adaptability.    

[25]            Before rendering his decision, the adjudicator began by addressing the question of whether he had jurisdiction to hear the complaint under subsection 242(3.1) of the Code. He focussed on the meaning of the terms "discontinuance of a function" and "lack of work". In this regard, he correctly cited the Supreme Court of Canada's decision in Flieger, supra. He also mentioned Donohue inc. v. Jacques Simard et al (1988), R.J.Q. 2118, a case concerning the distinction between lay-off and dismissal:

[TRANSLATION]                                                                                             Redress under section 124 of the Act respecting labour standards is possible only in cases where there has been a "dismissal". The distinction between lay-off and dismissal is well established. The latter term applies only to a breakdown in the employment relationship caused by subjective factors related to the personal characteristics of the employee. In the case at bar, despite the repercussions for the two employees concerned, there can be no denying that the decision to eliminate a position was motivated by strictly economic considerations. Once that had been established, the arbitrator no longer had jurisdiction to rule on the appropriateness of the employer's choice and thus committed a jurisdictional error. The main factor advanced by the employer, that is, seniority, could only be considered in the context in which it served to establish that the lay-off had been done in good faith and not to disguise a premeditated dismissal. Moreover, the Act does not include any provisions concerning the choice of the employee to be laid off, and the case law of the higher courts generally defers to the employer's discretion in this regard.

[26]            What I understand from this passage is that adjudicators must first ask themselves if the employer's decision was based on economic reasons affecting the business or if the lay-off was instead motivated by a consideration directly relating to the employee. In other words, the economic reasons must be real and substantiated and must not be a ruse to disguise the firing of an employee.

[27]            In the present case, the adjudicator highlighted the "sham test" developed by adjudicator Kenneth P. Swan (page 16 of the decision, or page 35 of Volume I of the Applicant's Record). According to this test, adjudicators must not limit their analyses to the issue of lay-off or dismissal. They must also consider if the choice of the person to be laid off was arbitrary, discriminatory , frivolous or dishonest.

[28]            Having taken note of the case law on subsection 242(3.1) and having read the wording of the Code closely, I am of the view that the approach described in Donohue, supra, is the one that must be applied. This being said, when an adjudicator rules that the complainant has been laid off because of a lack of work or the discontinuance of a function and not for another reason, the complaint can no longer be considered by that adjudicator (subsection 242(3.1) of the Code; Clerk v. Canadian Pacific Ltd., [2004] F.C.J. No. 872 (T.D.) (QL)).

[29]            In Clerk, supra, Russell J. quoted the words of the Federal Court of Appeal in Atomic Energy of Canada, supra, to reiterate that employers have the right to restructure their businesses, eliminate positions, and adjust their work forces. It is trite law that employers have complete latitude in deciding how to run their businesses and may lay off employees for legitimate business reasons, such as restructuring, without running the risk of being accused of unjust dismissal, even if the employees affected have spotless disciplinary records or have always been beyond reproach.

[30]            In the present case, the adjudicator found that the evidence submitted did not show a lack of work. He also concluded that there had been no discontinuance of a function, since the duties of the branch employees continued to be carried out. He found that, at the termination of her employment, the respondent was carrying out most of the duties of an RSC II position even though her position was designated PSC. Once she had been laid off, all of the duties she carried out were simply assigned to an RSC II position, and her PSC position title was eliminated. This being said, the adjudicator ruled there had been no discontinuance of a function. This was, rather, a change in the name of the position, and this name change alone did not constitute the discontinuance of a function within the meaning of the Code, since the activities remained unchanged. The adjudicator concluded by stating that the respondent's functions were merely added to those of another employee.

[31]            He also found that the Function Realignment initiative gave sufficient latitude to adjust staff so as to reduce the number of FTEs without having to eliminate the complainant's position. Considering that the lay-off was unnecessary, he concluded that the respondent had been unjustly dismissed.

[32]            With respect, I do not think that this is consistent with the meaning of "discontinuance of a function" found in the relevant case law. In the present case, the evidence shows that Mr. Bouchard had to reduce his work force by 5.78 FTEs in the Saguenay-Lac Saint Jean region, including 4.75 FTEs that had to be eliminated at the Chicoutimi branch. The adjudicator did not contest this evidence. In concluding that the applicant was not obliged to abolish positions to attain the objective, the adjudicator interfered with the employer's right to manage its business. It is true that the applicant could have achieved this objective another way, for example, by reducing the working hours of several employees and preserving the respondent's position. However, it chose instead to abolish positions, a decision which, in my view, was entirely up to the applicant.

[33]            The evidence shows that no full-time or part-time regular employee has been hired since the respondent was laid off. There was an overall reduction in full-time equivalent hours, and the attrition exercise was a genuine one.

[34]            It should be noted that the respondent's performance reviews had always been positive.

[35]            While I am sympathetic to the respondent, I must conclude that the adjudicator made a reviewable error. The applicant had to reduce the number of FTEs at the Chicoutimi branch. It decided to eliminate positions, a decision that it had every legal right to make. Since the applicable standard of review in this case is correctness, the adjudicator did not apply subsection 243(3.1) of the Code correctly.

                                               ORDER

THE COURT ORDERS that the application for judicial review be allowed. The decision of adjudicator Bruno Leclerc, dated April 26, 2004, is set aside. The respondent's complaint is dismissed. In light of the circumstances, there is no order as to costs.

              "Michel Beaudry"                      

Judge

Certified true translation

Michael Palles

APPENDIX

RELEVANT LEGISLATIVE PROVISIONS

Canada Labour Code                                                 Code canadien du travail

                                     FEDERAL COURT

                              SOLICITORS OF RECORD

DOCKET:                                           T-1037-04

STYLE OF CAUSE:                           ROYAL BANK OF CANADA v. SILVY LAPOINTE

PLACE OF HEARING:                                 Québec, Quebec

DATE OF HEARING:                                   April 4, 2005

REASONS FOR ORDER AND ORDER BY:         The Honourable Mr. Justice Beaudry

DATED:                                               May 5, 2005

APPEARANCES:

André Giroux                                        FOR THE APPLICANT          

Gilles Boivin                                          FOR THE RESPONDENT

SOLICITORS OF RECORD:

Ogilvy Renault, LLP                              FOR THE APPLICANT

Montréal, Quebec                                

SIMARD BOIVIN LEMIEUX, LLP     FOR THE RESPONDENT

Dolbeau-Mistassini, Quebec