Northern Exposure

Labor Arbitrators Have More Scope than Courts, Supreme Court Says

By Brian P. Smeenk

Canadian labor arbitrators are not legally bound to court-made legal rules. Rules of evidence, for example, are more relaxed. Rules of contract interpretation may also vary. But just how far arbitrators can deviate from general rules of law has been an open question.

A recent decision by the Supreme Court of Canada took a fresh look at this issue. It confirmed that labor arbitrators will be given lots of leeway by the courts.

In this decision, Nor-Man Regional Health Authority Inc. v. Manitoba Association of Health Care Professionals, the court considered a labor arbitrator’s application of the legal principle of estoppel. This is a principle of general contract law. It means, essentially, that a representation by a party that it will not enforce its strict contractual rights can be enforced if the other party relied on that promise to its detriment.

This ruling holds that arbitrators need not apply this general principle of contract law in the same way as the courts.

What happened

Jacqueline Plaisier had been employed continuously for 20 years — though at times only on a casual basis — by Nor-Man Regional Health Authority. She contended that she was entitled upon 20 years of employment to a bonus week of vacation under the terms of the collective agreement between Nor-Man and her union, the Manitoba Association of Health Care Professionals.

Nor-Man denied Plaisier’s request. It said that her time as a casual employee didn’t count for the purposes of the relevant clause of the union agreement. Nor-Man had never counted casual time for this purpose. The union supported Plaisier and took her case to arbitration

An arbitrator endorsed the union’s interpretation of the vacation benefit clause. But he imposed an estoppel on the union’s claim for redress for the rest of the term of the collective agreement.

The employer had a consistent and open practice of calculating vacation entitlements as it did. The union acquiesced in that practice. The employer relied on the union’s acquiescence to its detriment. It would be unfair, the arbitrator found, for the union to now hold the employer to the strict terms of the collective agreement in that regard. Thus, the legal principle of estoppel applied.

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. But the Manitoba Court of Appeal overturned both decisions. It said that the arbitrator had to be correct in finding that estoppel applied because estoppel is a general principle of contract law. And he was not correct. He did not apply all of the same legal criteria for the application of estoppel as would a court. Therefore the decision could not stand.

Supreme Court’s ruling
On further appeal to Canada’ s highest court, it was ruled that the appeal court had erred in reviewing the arbitrator’s decision for correctness. The arbitrator’s decision only had to be a reasonable one. If it was, the courts should not interfere – even if the arbitrator decided the issue in a way that a court of law could not.

Said the court about labor arbitrators: “Theirs is a different mission, informed by the particular context of labor relations. To assist them in the pursuit of that mission, arbitrators are given a broad mandate in adapting the legal principles they find relevant to the grievances of which they are seized.” As long as they exercise that mandate reasonably, the courts won’t interfere.

What this decision means in the workplace
This case reinforces that the courts are prepared to give arbitrators lots of leeway. They will do so even on general principles of contract law. Arbitrators can apply these principles in a way tailored to the labor dispute before them so long as their decision is reasonable.

This case also confirms that parties’ past practice can prevent the strict application of a collective agreement’s language. And acquiescence in the practice can be inferred if the practice is well-known. While there is an element of fairness to that, it makes it less certain which contract clauses will be enforced as written and which will not.

Workplace parties are well advised to ensure that their practices are consistent with the written agreement. If not, you are well-advised to get legal advice to help define what rights are enforceable and how to keep mere practices from becoming legal entitlements.