Unexpected Employee Relocation Costs – Employee Rights/Labour Relations

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Recently, in Nowlan v. Canada (Attorney General) 2022 FCA 83, the Federal Court of Appeal considered the duties of an employer to its employees in the event of an employee transfer.

In this case, the court reviewed a decision by the Federal Public Service Labor Relations and Employment Board in which the board determined that a government employee who requested a transfer for personal reasons had to pay relocation expenses under a collective agreement directive. The directive included an indemnification provision which read, in part:

12.1.2 An employee-requested transfer that results in authorized relocation to a position at the appropriate group and level that is vacant upon arrival at the new place of duty shall be deemed to be an employer-requested relocation. subject to the following:

(a) The relocated employee shall be reimbursed for relocation expenses within the limits prescribed by this directive, unless the deputy head or delegated senior official provides written certification that, had the vacancy not been filled following a transfer requested by the employee, they would have been filled according to normal staffing procedures without incurring any relocation costs.

(b) When a position is so certified, the employee is entitled:

* the sum of up to five thousand dollars ($5,000.00) in their personalized fund;

Board decision

In 2010, the employee requested to move from Ottawa to Toronto and was told by the employer that no relocation expenses would be paid. The employee made this request to the employer, even though the relocation involved demotion to a position whose rate of pay was lower than the one she occupied in Ottawa. The costs incurred by the employee for the relocation included $26,124 in moving expenses and eight days leave to arrange the move.

About two years later, the employee asked her employer if they would cover her relocation costs in accordance with the directive. The employer considered the employee’s claim for two years and denied the claim on the grounds that she did not have written authorization for reimbursement before incurring the expense.

The employee’s union filed a grievance against the denial of the employee’s claim for reimbursement, with the matter to be heard and decided in 2021. In its decision, the board recognized the principles of interpretation of the collective agreement that the words should be interpreted according to their ordinary meaning, concluding that where the wording of the collective agreement is clear, “it must be enforced, even if the result may seem unfair or impose additional costs”. However, in interpreting the indemnification provision, the Board determined that it should go beyond the technical rules of contract interpretation and use common sense.

In summary, the Board concluded that even though the employee had not followed the directive procedure to request pre-approval of moving expenses, she was nevertheless entitled to reimbursement of the moving expenses incurred. The Board awarded the employee $5,000 in relocation expenses and reimbursement for the eight days of leave she used for relocation, at the lower rate of pay, subject to required statutory deductions.

A judicial review

The employee sought judicial review of the board’s decision and its interpretation of the directive. The Federal Court of Appeal stated that the standard of review of reasonableness applies, noting that “where a decision-maker’s reasons reveal that the decision is based on an unreasonable chain of analysis, it will not satisfy the required standard of analysis of substantiation, transparency and comprehensibility.”

The court agreed with the Commission’s interpretation of certain provisions of the directive. However, the court took issue with counsel’s interpretation of the indemnification provision. The court found that instead of applying the legal principles invoked earlier in its analysis of the directive, the board had taken a “non-technical, common-sense approach” in interpreting the compensation.

This, the court found, resulted in a lack of “logical consistency” in the board’s decision. This was especially true given the well-established law of collective agreement interpretation that language must be considered “in its ordinary and normal meaning, in the full context of the agreement”. Only when there is ambiguity should a decision maker assess extrinsic evidence in language interpretation. The court found that there was no ambiguity in the indemnification provision and therefore the board should not have taken a different approach to its interpretation.

Further, the court found that it was unreasonable for the board to conclude that the employee’s failure to obtain written approval before incurring relocation expenses was an error on her part. The court found that this error arose from the employer’s erroneous notice to the employee that no reimbursement of expenses would be provided, despite her entitlement to those expenses. On this point, the court found, the jury’s reasoning lacked logic and consistency.

The court also criticized the council’s decision to rely on a decision that diverged from the facts of the case and its failure to explain why it rejected the reasoning of a different decision interpreting the indemnification provision.

The board did not award its remedy based on applying the wording of the directive to the facts, but rather based on a hypothetical scenario, rendering the board’s decision unreasonable.

Finally, the court found that the employee’s compensation for her eight days of leave had been incorrectly calculated by the board: the employee had been granted eight days of compensation at the lowest rate of pay (due to her demotion), while five of those days were technically taken while she was still entitled to the higher rate of pay due to her higher position.

The court overturned the board’s decision and sent the case back to the board.

Take away food

The board’s review is pending. However, we note the following takeaways from Nowlan:

  • The applicable standard of review is that of reasonableness.

  • A decision will be unreasonable in the following circumstances:
    • when a decision maker’s reasons reveal that the decision is based on an unreasonable chain of analysis;

    • where the reasoning of the decision-maker lacks logic and coherence;

    • when the decision-maker has not explained his rejection of a precedent clearly relevant to the case; and

    • where the decision maker bases an appeal on a hypothetical situation rather than on the facts of the case.

While every effort has been made to ensure the accuracy of this article, you are encouraged to seek specific advice on areas of concern and not to rely solely on what is contained herein. The article is for general information purposes only and does not constitute legal advice.

Previously printed in The Lawyer’s Daily, a publication of LexisNexis Canada.

The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.

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