• Reviewing the Quantum of Unfair Dismissal Compensation
  • February 1, 2013
  • Law Firm: Norton Rose Canada LLP - Montreal Office
  • All too often, commissioners get it wrong when determining the quantum of compensation to be awarded to an employee that has been unfairly dismissed. What commissioners fail to appreciate is that the purpose of awarding compensation to an unfairly dismissed employee is to offset the financial loss which the employee has suffered as a result of a wrongful act. The purpose of awarding compensation to an employee is not to punish the employer.

    In the case of Plastic Wrap - A division of CTP Limited v Statutory Council for the Printing, Newspaper and Packaging Industry and Others [2012] 33 ILJ 2668 (LC) the court was faced with this very problem and was tasked with determining whether or not an award of eight months’ compensation was reviewable.

    The employee was charged with and found guilty of three counts of gross misconduct and was dismissed by his employer. During the arbitration proceedings, the commissioner found the employee not guilty of all the charges, except for the second charge which pertained to gross misconduct for using foul language in the presence of subordinates (for which the employee had received a final written warning previously).

    Despite the commissioner having found the employee guilty of the second charge, the commissioner was of the view that dismissal was too harsh a sanction having regard to the employee’s length of service and clean disciplinary record.

    In determining the quantum of compensation to be awarded to the employee, the commissioner considered the employee’s length of service (20 years), the employee’s unblemished disciplinary record as well as his personal circumstances. Interestingly, the commissioner also took into account the fact that the employee’s baby daughter had been born about a month prior to his dismissal and that he was the family’s breadwinner as his partner was retrenched from her job shortly before the birth of their daughter. The commissioner also took into account the fact that the employee had a son from a previous marriage who had special needs related to cerebral palsy for whom he paid maintenance as well as the fact that the employee had a heavily bonded home.The commissioner noted that the employee had found an alternative job soon after his dismissal but at a much lower salary. In these circumstances, the commissioner awarded the employee eight months’ compensation.

    The court was satisfied that the commissioner took relevant considerations into account in her decision regarding the fairness of the employee’s dismissal. The court, however, found that the commissioner adopted the incorrect approach in determining the quantum of compensation.

    In examining the quantum of compensation, the court relied on the Labour Appeal Court case of Kemp t/a Central Med v Rawlands [2009] 30 ILJ 2677 (LAC) which stipulates that when the Labour Court is called upon to interfere with a commissioner’s discretion to award compensation in terms of section 194(1) of the Labour Relations Act, 1995 (the LRA) the test to be applied is whether the commissioner acted capriciously or upon the wrong principle, or with bias or whether or not the discretion exercised was based on substantial reasons or whether the decision-maker adopted an incorrect approach.

    The court considered the factors taken into account by the commissioner when awarding eight months’ compensation (the employee’s newly born child, the health condition of one of the employee’s children as well as the employee’s bond on his house) and found that the commissioner adopted an incorrect approach. Specifically, the court concluded that the commissioner blurred the distinction between the factors to be taken into account in exercising a discretion to award a specific quantum of compensation in terms of section 194(1) of the LRA and those mitigating factors normally taken into consideration by a tribunal when it decides, having established guilt, on an appropriate penalty.

    The court also quoted the Labour Appeal Court decision of Le Monde Luggage CC t/a Pakwells Petje v Dunn N.O. and Others [2007] 28 ILJ 2238 (LAC) which specifically held that the compensation which must be awarded to a wronged party is a payment to offset the financial loss which has resulted from a wrongful act. The primary enquiry is to determine the extent of the loss taking into account the nature of the unfair dismissal and hence the scope of the wrongful act on the part of the employer.

    The Labour Court concluded that the finding in relation to the substantive unfairness of the employee’s dismissal was not reviewable. However, the court set aside the order of eight months’ compensation awarded to the employee and reduced the amount of compensation to six months.