Canada’s Highest Court Grants Significant Deference to Labour Arbitrators

February 13, 2012

A recent Supreme Court of Canada case, Nor-Man Regional Health Authority Inc. v. Manitoba Association of Health Care Professionals, confirms that a high degree of deference is to be granted to arbitral decisions under judicial review. Justice Fish, writing for a unanimous court, confirmed that arbitrators have significant leeway in applying/modifying legal principles and crafting appropriate remedies.

The Facts

Ms. Plaisier, a nurse’s aide, contended that she was entitled, upon 20 years of employment, to a bonus week of vacation pursuant to the terms of the collective agreement between Nor-Man and the nurse’s Union. Her request was denied by Nor-Man. The provisions of the collective agreement granted the extra week of vacation after 20 years of employment. However, Nor-Man had consistently applied these provisions according to the “seniority date” of its employees which excluded periods of casual employment. During a twenty year history of collective bargaining including five collective agreements, the Union had never challenged this practice until Ms. Plaisier’s grievance.

Judicial History

At arbitration, the panel decided that the employer’s practice of excluding casual service in calculating vacation benefits breached the terms of the collective agreement. However, the Union was barred by its long-standing acquiescence from grieving the employer’s application of the disputed provisions of the collective agreement.  The arbitrator held that the Union was estopped from asserting its strict rights under the disputed provisions of the collective agreement until the expiry of the agreement.

The union’s application for judicial review was dismissed in the Manitoba Court of Queen’s Bench on the ground that the arbitrator’s award was reasonable. On further review to the Manitoba Court of Appeal, the arbitral decision was reversed. The Court of Appeal held that correctness, and not reasonableness, was the governing standard since the arbitrator’s finding of estoppel raised a question of law that was of central importance to the legal system as a whole that was outside the expertise of labour arbitrators. The Court of Appeal then concluded that the arbitrator had failed to apply the correct legal test for the doctrine of promissory estoppel. Consequently, the Court of Appeal set aside the estoppel imposed by the arbitrator.

The SCC Decision

The Supreme Court of Canada reversed the decision of the Court of Appeal and affirmed the decision of the arbitrator. The issue for the Supreme Court was whether arbitral awards that apply common law or equitable remedies are for that reason subject to judicial review for correctness.

The SCC confirmed that arbitral awards under a collective agreement are subject, as a general rule, to the reasonableness standard of review. However, 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”.

The SCC rejected the Court of Appeal’s reasoning that in applying common law or equitable principles arbitrators are delving into questions of general law that are of central importance to the legal system as a whole outside their expertise. The court reasoned that labour arbitrators are not legally bound to apply equitable and common law principles in the same manner as courts of law. Labour arbitrators may 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.

However, according to Fish J., an arbitrator’s discretion in this regard is not boundless. Decisions that stretch common law or equitable principle in a manner that does not reasonably respond to the distinctive nature of labour relations will remain subject to judicial review on a reasonableness standard.

The SCC ruled in this case that the labour arbitrator’s award could not be considered unreasonable. The arbitrator adapted and applied the equitable doctrine of estoppel in a manner reasonably consistent with the objectives and purposes of the Labour Relations Act, 1995, the principles of labour relations, the nature of the collective bargaining process, and the factual matrix of the grievance.

Conclusion

The intriguing aspect of this decision is the expanded role fashioned by the SCC for labour arbitrators in generating the law within their field. In this case, the SCC has placed control over the continued development and evolution of legal principles as they apply to labour relations squarely in the control of labour arbitrators. It appears that labour arbitrators may freely adapt legal doctrines and remedies so long as they do not stray beyond the bounds of reason.

Miller Thomson LLP will keep you apprised of further developments in this area.

Case citation: Nor-Man Regional Health Authority Inc. v. Manitoba Association of Health Care Professionals, 2011 SCC 59 (CanLII).

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