December 28, 2011

The HR Space is edited by Lyne Duhaime, Karen M. Sargeant and Brian P. Smeenk.

In a decision issued on December 5, 2011 [Nor-Man Regional Health Authority Inc. v. Manitoba Association of Health Care Professionals] the Supreme Court of Canada considered a labour arbitrator's application of the legal principle of estoppel. This is a principle of general contract law. It means essentially that a representation that a party will not rely on its contractual rights, can be enforced if the other party relied on that promise. This case considered whether arbitrators must apply this general principle of contract law in the same way as the courts. The Court said they do not.

It has long been a principle of Canadian labour law that labour arbitrators are not legally bound to various legal principles in the same manner as courts of law. Rules of evidence, for example, are more relaxed. But just how far arbitrators can deviate from general rules of law has been an open question.

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. Ms. Plaisier 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 her request. It said that her time as a casual employee did not 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 Plaisir and took her case to arbitration.

An arbitrator endorsed the union's interpretation of 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. 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 Queens 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 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 labour arbitrators: "Theirs is a different mission, informed by the particular context of labour 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 labour dispute before them, so long as their decision is reasonable.

This case also confirms that parties' past practices can prevent the strict application of their collective agreement's language. And acquiescence in a 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 avoid mere practices from becoming legal entitlements.

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