Canada: Labour Arbitrators Need Not Be "Correct" – Just Be "Reasonable"

Last Updated: December 13 2011
Article by George Waggott

The courts have long struggled with the degree of deference which should be shown to labour relations arbitrators. As labour disputes become increasingly complex, it is more and more difficult to see anything like a "simple" case. As a result, the system of specialized arbitrators who decide cases between employers and unions under collective agreements have become increasingly formalistic and the legal scrutiny which has been brought to bear on these decisions has increased.

In a development which is positive for labour relations practitioners, the Supreme Court of Canada ruled on December 2, 2011 that decisions of labour arbitrators should be shown a high level of deference. The Court's decision in Nor-Man Regional Health Authority Inc v Manitoba Association of Health Care Professionals, 2011 SCC 59, involved an appeal which focused on the nature and standard of review of the courts of arbitrator's rulings.

Jacqueline Plaisier had been employed by the Nor-Man Regional Health Authority for 20 years, and she and her union disputed the approach taken by her employer to the calculation of her vacation. The issue involved an interpretation under the applicable collective agreement and whether or not Ms. Plaisier was entitled to a "bonus" week of vacation on the basis of reaching her 20th anniversary with the organization. The collective agreement wording favoured Ms. Plaisier, with "employment" for the purposes of the agreement being equivalent to the period which commenced when she started working for the Health Authority. In actual fact, the employer's longstanding practice was to treat the employee's seniority date as the trigger for vacation entitlements. As a result of this, a period when Ms. Plaisier worked as a casual employee was not counted by the employer for the purposes of her vacation calculation.

The union submitted the matter to arbitration and was ultimately unsuccessful. While the collective agreement interpretation clearly supported the union's position (the seniority date practice of the employer was not mentioned in the agreement, and the reference was to employment as they alleged), the arbitrator refused to allow the union to rely on the express wording of the collective agreement. Instead, the arbitrator held that the union was subject to an estoppel which prevented them from relying on their collective agreement rights. This was based on a longstanding and widely-known practice of how the wording was applied by the parties. The employer was able to successfully rely on vacation credit statements provided to bargaining unit employees and relevant seniority reports which were distributed on an ongoing basis.

The union proceeded to seek judicial review of the arbitrator's decision on the basis that the decision to apply estoppel was "incorrect". The Manitoba Court of Queen's Bench judge who heard the application dismissed it, holding that the decision of the arbitrator was not unreasonable. In this decision, the Court found that the reasoning was intelligible, justifiable and "falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law".

The case was subsequently appealed to the Manitoba Court of Appeal, which took a different view. In that decision, the Court of Appeal held that the Court of Queen's Bench had erred by applying the reasonableness standard with respect to the legal finding of estoppel which had been made by the arbitrator. On appeal, the Court of Appeal held that correctness was the relevant standard since the finding of estoppel raised a question that was of central importance to the legal system as a whole and was not one which fell within the specialized expertise of a labour relations arbitrator.

The employer successfully appealed to the Supreme Court of Canada. As a result, the original decision of the arbitrator was upheld, with the finding of estoppel ultimately prevailing. In writing for a unanimous court, Fish J. noted that arbitration awards under collective agreements are, as a general rule, subject to review on a standard of reasonableness. Put simply, if the arbitrator outlines a rational or reasoned basis for making a decision, it will not likely be subject to review by the courts.

While estoppel was imposed based on the circumstances unique to this case, this was a matter under the collective agreement and not deemed to be something which was therefore transformed into a question of general law. Further, the Supreme Court of Canada noted the importance of taking a contextual approach which includes the following factors:

  1. the presence or absence of a privative clause which might limit rights on appeal;
  2. the purposes of the tribunal (in this case the use of a specialized arbitrator was designed to make labour relations decisions on an expedited basis);
  3. the nature of the question at issue (the issue here was ultimately whether or not a specific bargaining unit employee had a vacation entitlement for a period of time which would end once the then existing collective agreement expired); and
  4. the expertise of the tribunal or decision maker.

The Supreme Court of Canada also made some very helpful comments about the importance of showing deference to arbitrators who have a broad mandate in fostering peace in industrial relations settings. As such, the ongoing relationship between parties depends in part on decisions which consider the long term interests of both employees and the employer, which is something which labour arbitrators are uniquely placed to decide.

Although this decision arose from a distinct set of facts, the outcome here may be of more broad application. In particular, there may be less of an appetite to seek judicial review of decisions of labour arbitrators given the clear statement from Canada's highest court regarding the high degree of deference to be shown to arbitrators.

The foregoing provides only an overview. Readers are cautioned against making any decisions based on this material alone. Rather, a qualified lawyer should be consulted.

© Copyright 2011 McMillan LLP

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