For those suggesting that the interviewee should be told that his smell is an issue I would be pretty nervous to do this myself. I don't think the decision is racist, but if you mention the smell and they don't eliminate it and then don't get the job they could likely file a human rights complaint. All that is required is a single form to fill out and then the provincial HRC will start a case including an investigation and a tribunal that you will have to attend to defend yourself. Even if you win you still lose because it took a bunch of your time and you may have decided to hire a lawyer to help defend you.
The downside risk of giving a reason to me far outweighs the benefits to the employer of giving that reason and I would be very reluctant to do it.
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