On Friday, December 2, the Supreme Court granted an appeal from the Manitoba Court of Appeal, determining that an arbitral award applying common law or equitable remedies deserves deference, and should be reviewed on a standard of reasonableness rather than correctness. Holding that labour arbitrators are not legally bound to apply equitable and common law principles, including estoppel, in the same manner as courts of law, and that they have a broad mandate to craft appropriate remedial doctrines when the need arises, the Supreme Court held that the arbitrator acted reasonably in deciding that a union was estopped, i.e. precluded, from enforcing the strict terms of a collective agreement, based on its long-standing failure to object to the employer's practice.
Background:
This case arose from a dispute between the Manitoba Association of Health Care Professionals and the Nor-Man Regional Health Authority over the entitlement of casual employees to paid vacations. The collective agreement contained extensive provisions dealing with employees and vacation entitlement. In July 2008, a nurses' aide filed a grievance alleging that the employer was breaching the pertinent provisions of the agreement by calculating her entitlement to certain vacation benefits not on the basis of the July 1988 start date on which she was hired as a casual but rather on the basis of the date almost eleven years later when she became a permanent employee, and seniority started to accrue.
In a November 2008 decision, Arbitrator Robert Simpson decided that the employer's practice of excluding casual service in calculating vacation benefits breached the terms of the collective agreement, which tied vacations to length of employment rather than seniority as a permanent employee. However, the arbitrator concluded that the union was barred by its long-standing acquiescence from grieving the employer's application of the disputed vacation provisions. The arbitrator determined that the employer was entitled to assume that the union had accepted its practice. The doctrine of estoppel bars an employer or employee from enforcing a strict right under the collective agreement in circumstances where it would be inequitable to do so – for example, where a party previously represented (by statements or by silence) that it would not rely upon its strict legal rights, and the other party relied upon this promise to its detriment.
The arbitrator's award was upheld by a Superior Court judge on judicial review, but was overturned by the Manitoba Court of Appeal, on the ground that in applying the legal doctrine of estoppel, the arbitrator must be correct, and he was not, since he made no finding that the union intended by its silence to affect the legal relations of the parties. The employer appealed to the Supreme Court of Canada
The Decision:
The Supreme Court unanimously (7-0) allowed the appeal, and restored the arbitrator's decision.
Justice Morris Fish, writing for the Court, held that the arbitrator acted reasonably in applying the doctrine of estoppel. Utilizing the analysis set out by the Supreme Court of Canada in Dunsmuir v. New Brunswick, [2008] S.C.J. No. 9 (QL), Justice Fish determined that the application of the equitable remedy of estoppel by the arbitrator should be reviewed on a standard of reasonableness, consistent with the general rule that reasonableness is the standard of review governing arbitral awards under a collective agreement. Holding that the estoppel question did not involve an issue of central importance to the legal system that was beyond the expertise of the arbitrator, Justice Fish rejected a general rule to the effect that arbitral awards that apply common law or equitable remedies are subject to judicial review for correctness.
Examining these principles more closely and applying the contextual analysis set out in Dunsmuir, Fish based his conclusion on the principle that labour arbitrators require flexibility to craft appropriate remedies, and that they are not legally bound to apply equitable and common law principles in the same manner as courts. He stated:
Common law and equitable doctrines emanate from the courts. But it hardly follows that arbitrators lack either the legal authority or the expertise required to adapt and apply them in a manner more appropriate to the arbitration of disputes and grievances in a labour relations context.
On the contrary, labour arbitrators are authorized by their broad statutory and contractual mandates – and well equipped by their expertise – to adapt the legal and equitable doctrines they find relevant within the contained sphere of arbitral creativity. To this end, they may properly 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.
Justice Fish reflected that this power to adapt common law and equitable doctrines flowed from the broad grant of authority vested in labour arbitrators by collective agreements, by statutes such as the Labour Relations Act, and by arbitrators' roles as peace-makers in industrial relations. He noted that arbitrators are uniquely placed to respond to the challenges of the employer-employee relationship, and that in doing so, the need for arbitrators to be able to respond flexibly is critical.
However, while asserting that "reviewing courts must remain alive to [the] distinctive features of the collective bargaining relationship, and reserve to arbitrators the right to craft labour specific remedial doctrines," and that "[w]ithin this domain, arbitral awards command judicial deference," Justice Fish was careful to note that arbitral discretion has boundaries. In this regard, he cautioned: "An arbitral award that flexes a common law or equitable principle in a manner that does not reasonably respond to the distinctive nature of labour relations necessarily remains subject to judicial review for its reasonableness.
Justice Fish also pointed to other contextual factors which favour judicial deference to arbitrators as they apply common law and equitable principles. These factors include the fact that s.128(2) of the Manitoba Labour Relations Act contains a privative clause restricting judicial review by arbitrators. As well, he noted that arbitrators benefit from institutional expertise in resolving disputes under collective agreements, even if they lack personal expertise in matters of law.
Turning to the facts of the case before him, Justice Fish held that the labour arbitrator's imposition of estoppel was reasonable, and that the arbitrator's reasons coherently explained why he imposed the remedy. In Fish's view, "the labour arbitrator's reasons [were] not just transparent and intelligible, but coherent as well. They set out in detail the evidence, the submissions of the parties, and the arbitrator's own analysis. The arbitrator reviewed the decisions relied on by the parties, and he identified and applied the precedents he found relevant and persuasive. They are consistent with his decision, and his reasons are amply sufficient to explain why he imposed the remedy of estoppel in this case."
Moreover, Justice Fish rejected the union's reliance on the fact that the arbitrator did not make a factual finding that the union intended to affect its legal relationship with the employer, as required by the test for estoppel in the courts, holding that such a finding was not necessary, as the arbitrator "adapted and applied the equitable doctrine of estoppel in a manner reasonably consistent with the objectives and purposes of the [Manitoba Labour Relations Act], the principles of labour relations, the nature of the collective bargaining process, and the factual matrix of [the employee's] grievance."
Comment:
This decision reinforces the important principle that arbitrators are to be given a wide latitude in applying common law and equitable law principles in crafting remedies. The Supreme Court has affirmed that courts should take a deferential approach when reviewing the application of legal principles by arbitrators when these principles are being adapted to the unique context of workplace relations.
Nor-Man Regional Health Authority Inc. v. Manitoba Association of Health Care Professionals
Supreme Court of Canada
Justice Morris Fish, with Chief Justice Beverley McLachlin, and Justices Louis LeBel, Marie Deschamps, Rosalie Abella, Marshall Rothstein and Thomas Cromwell concurring
December 2, 2011
Read the full text of the Supreme Court of Canada's decision in Nor-Man Regional Health Authority Inc. v. Manitoba Association of Health Care Professionals
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Arbitrators have wide leeway in applying legal doctrines, Supreme Court declares