SCC Increases the Level of Judicial Deference to Labour Arbitrators

Labour arbitration affords an economical, accelerated and informal mechanism to maintain peaceful industrial relations and address the economic needs of an enterprise. Arbitrators adjudicate disputes by interpreting the language of the collective agreement, hearing evidence, and determining the obligations of the employer and the union. When arbitration decisions are challenged, the legal approach taken by judges is critical to the functioning of the system as a whole.

One contentious question is: how much deference should courts accord to labour arbitrators? In Nor-Man Regional Health Authority Inc. v Manitoba Association of Health Care Professionals, [2011] 3 SCR 616, the Supreme Court of Canada (SCC) answers that question by asserting that a high degree of deference should be given to arbitrators, effectively limiting the extent to which judges may scrutinize arbitral decisions.

Background

Jacqueline Plaisier has been employed by Nor-Man Regional Health Authority Inc. (“Nor-Man”) since July 12, 1988. She and her union, the Manitoba Health Care Professionals (the “Union”) contend that Plaisier, upon 20 years of employment, is entitled to a “bonus” week of vacation pursuant to the collective agreement between Nor-Man and the Union. Nor-Man denies this request.

The disputed clause of the collective agreement states that: “an additional week of paid vacation shall be granted to an employee in the year of her twentieth (20th) anniversary of employment…This provision shall apply to all employees employed on August 31, 1989.  It ceases to apply to employees hired after August 31, 1989.”

Therefore, a literal reading of the collective agreement favours Plaisier’s grievance. However, Nor-Man argues that Plaisier was employed as a casual in 1988 and she only began to accrue seniority in 1999; thus, she is not eligible for a bonus week of vacation. In reality, over the last twenty years, Nor-Man has been excluding the period of casual employment when calculating vacation entitlements for other employees, but the Union has never challenged such practice until now.

Judicial History

Under Manitoba’s Labour Relations Act, CCSM, c L10 (the “LRA”), Plaisier’s grievance went to arbitration. The arbitrator interpreted the term “employment” as being the time at which Plaisier started working at Nor-Man since 1988. However, the arbitrator refused to rely on the technicality of the agreement. Instead, he imposed an estoppel on the Union’s claim on the basis of a “long standing, consistent and open” practice of calculating vacation entitlements between the parties. Because all employees had constructive knowledge of this practice through seniority reports or vacation sheets, the Union’s silence amounted to acquiescence in the employer’s practice.

The arbitrator found that it would be unfair and inequitable to allow the Union to enforce the agreement when it had never opposed the practice in the past 20 years. Therefore, the arbitrator estopped the Union from asserting its legal rights. The Union’s application for judicial review was dismissed in the Manitoba Court of Queen’s Bench (see 2009 MBQB 213), where Bryk J. followed Dunsmuir v New Brunswick, [2008] 1 SCR 190, and held that the standard of review was reasonableness.

While the arbitrator never mentioned “promissory estoppel”, the Court of Appeal thought that the estoppel imposed by the arbitrator resembled promissory estoppel (the SCC later agreed with this). The Court of Appeal held that the appropriate standard of review was “correctness” because the finding of estoppel raised a question that was of “central importance to the legal system as a whole” and was beyond the expertise of the arbitrator. Applying the “correctness” standard, the Court of Appeal stated that the arbitrator had incorrectly applied promissory estoppel and ruled in the Union’s favour.

SCC Analysis

Fish J., writing for a unanimous Supreme Court, disagrees with the Court of Appeal and restores the arbitrator’s decision. Fish J. notes that the arbitrator’s decision on collective agreements is subject to review on a standard of reasonableness. Following the analytical framework set out in Dunsmuir, the standard of reasonableness ‘normally prevails where the tribunals’ decision raises issues of fact, discretion or policy; involves inextricably intertwined legal and factual issues; or relates to the interpretation of the tribunal’s enabling (or “home”) statute or “statutes closely connected to its function, with which it will have particular familiarity”.’

However, does an imposition of estoppel bring the arbitral award within an exception to this general rule? In answering this question, Fish J. states the following:

“An administrative tribunal’s decision will be reviewable for correctness if it raises a constitutional issue, a question of “general law ‘that is both of central importance to the legal system as a whole and outside the adjudicator’s specialized area of expertise’”, or a “true question of jurisdiction or vires”. It will be reviewable for correctness as well if it involves the drawing of jurisdictional lines between two or more competing specialized tribunals.”

Fish J. rules that an imposition of estoppel does not transform it into a question of general law “that is both of central importance to the legal system as a whole and outside the adjudicator’s specialized area of expertise” within the meaning of Dunsmuir. Further, when performing the second step of the standard of review inquiry mandated by Dunsmuir, Fish J. states that the contextual analysis should include the following factors: (1) the presence or absence of a privative clause; (2) the purposes of the tribunal; (3) the nature of the question at issue; and (4) the expertise of the tribunal.

Importantly, Fish J. declares that labour arbitrators are “not bound by a strict legal interpretation of the matter in dispute” (s. 121 of LRA). They are authorized to develop doctrines and fashion remedies appropriate in their field, “drawing inspiration from general legal principles, the objectives and purposes of the statutory scheme, the principles of labour relations, the nature of the collective bargaining process, and the factual matrix of the grievances of which they are seized”. Since “rigidity in the dispute resolution process risks not only the disintegration of the relationship, but also industrial discord”, arbitrators should be given this flexibility to craft appropriate remedial doctrines when needed.

Furthermore, Fish J. explains why the doctrine of estoppel must be applied differently in arbitration than in a court of law by citing Paul C. Weiler:

“… The union and the employer deal with each other for years and years through successive agreements and renewals… By and large, it is the employer which takes the initiative in making operational decisions within the framework of the collective agreement. If the union leadership does not like certain management actions, then it will object to them and will carry a grievance forward about the matter.

The other side of that coin is that if management does take action, and the union officials are fully aware of it, and no objection is forthcoming, then the only reasonable inference the employer can draw is that its position is acceptable. Suppose the employer commits itself on that assumption. But the union later on takes a second look and feels that it might have a good argument under the collective agreement, and the union now asks the arbitrator to enforce its strict legal rights for events that have already occurred. It is apparent on its face that it would be inequitable and unfair to permit such a sudden reversal to the detriment of the other side.”

Fish J. affirms that arbitrators are qualified to tailor general legal principles to respond to the distinctive nature of labour relations. Since the arbitrator’s decision is transparent, intelligible and coherent, deference should be given to the arbitration tribunal here.

Conclusion

This decision sends a strong signal to lower courts to refrain from interfering with the decisions of labour arbitrators. While judicial review can prevent an undue extension of arbitral power, arbitrators have a distinctive role in fostering peace in industrial relations. The SCC reinforces that arbitrators can deviate from a strict interpretation of legal principles and craft doctrines that are tailored to the labour dispute before them as long as the decision is within the realm of reasonableness. Given the expansive deference the SCC decision continues to give to arbitrators, the number of applications for judicial review of arbitral decisions will probably decline.