Northern Exposure

Protecting Yourself from Canadian Labor Arbitrators’ Expanding Powers

By Brian P. Smeenk

How can you protect yourself from arbitrators’ ever-increasing damages awards, based on ever-expanding grounds?

In the April 25 Northern Exposure entry “Canadian Court Trims $500K Dismissal Damages, Upholds Arbitrator’s Broad Authority,” we reported on the latest notable example of a Canadian labor arbitrator’s expansive award being upheld by the courts. That decision surprisingly granted a lower-level Greater Toronto Airport Authority employee $500,000+ for past and future wages, plus damages for mental distress, pain and suffering, and punitive damages. In upholding most of the award, the court clarified the broad remedial authority of labor arbitrators. But it confirmed most of the arbitrator’s powers, at least under that agreement.

That case is part of a pattern of growing awards based on an ever-expanding list of grounds for damages.

This all seemed to start in 1995. The Supreme Court of Canada issued two related decisions, Weber v. Ontario Hydro and New Brunswick v. O’Leary. The court ruled that arbitrators have exclusive jurisdiction to deal with all labor disputes arising from the employment relationship governed by a collective agreement. And it doesn’t matter what the cause of action or complaint is. Before that, most of us thought that an arbitrator’s job was just to interpret and apply the collective agreement.

Despite a lot of criticism from academics, lawyers, and arbitrators, this trend has continued. There are now many cases where arbitrators have considered whether they should award damages for things like defamation – even though that is not something addressed in the collective agreement – and claims about other kinds of injuries, mental distress, pain and suffering, and punitive damages. No collective agreement I know of tells arbitrators they can award punitive damages. But they are now doing it.

The list could continue to expand. Claims “arising out of the employment relationship” are probably as variable as a union lawyer’s imagination.

So what can you do about this? I believe there are self-help remedies available. The same decisions that started this trend actually hold clues to how to resolve it.

First, it’s important to realize that the original O’Leary case actually involved a claim for damages against an employee. The court said that claim should go to an arbitrator, not to a court. So what if employers started using this mechanism more often to bring claims for damages against unions or employees in appropriate circumstances where serious harm has been caused? Might that cause a rethinking of the wisdom of leaving arbitrators with wide-open discretion?

Both Weber and O’Leary also ruled that an arbitrator has jurisdiction over a dispute if it “expressly or inferentially arises out of the collective agreement.” In the recent Greater Toronto Airport Authority case, the court notes several times the lack of limits in that collective agreement on the arbitrator’s remedial power.

So it would appear that employers and unions can protect themselves from this ever-expanding implied power of arbitrators by being explicit about the limits of what the parties will or won’t allow arbitrators to do. Why not agree on what those limits are?

Companies with unions in Canada would be well-advised to seek advice from labor law experts as to how your collective agreements can be tailored to protect you from results you never imagined could befall you.