National Automobile, Aerospace Trans-portation and General Workers Union of Canada (C.A.W. - Canada) Local No. 27 v. London Machinery Inc., 2006 CanLII 8711 (ON CA)

National Automobile, Aerospace Transportation and General Workers Union of Canada (C.A.W.-Canada) Local No. 27 v. London Machinery Inc.

[Indexed as: National Automobile Aerospace Transportation and General Workers Union of Canada (C.A.W.-Canada) Local No. 27 v. London Machinery Inc.]

79 O.R. (3d) 444

[2006] O.J. No. 1087

Docket: C43172

Court of Appeal for Ontario,

Laskin, Cronk and Armstrong JJ.A.

March 23, 2006

Employment -- Labour relations -- Grievance arbitration -- Judicial review -- Standard of review -- Standard of review of decision of arbitrator interpreting collective agreement and provisions of Employment Standards Act and Regulation that of patent unreasonableness.

Employment -- Labour relations -- Layoff -- Arbitrator's interpretation of s. 56(2)(c) of Employment Standards Act suggesting that agreement between employer and union establishing recall period for laid-off unionized employees will operate in all circumstances to both extend term of temporary lay-off and to defer any entitlement of employee to termination pay for full duration of contractual recall period -- That interpretation inconsistent with and undermining purpose of election process under s. 67(1) of Act -- Arbitrator's decision patently unreasonable -- Employment Standards Act, 2000, S.O. 2000, c. 41, ss. 56(2)(c), 67(1).

M, a unionized welder-fitter, was temporarily laid off by the employer. When M had been laid off for almost 36 weeks, the union launched a grievance on his behalf, claiming that M's employment was deemed to have been terminated and that he was entitled to termination pay under the Employment Standards Act, 2000 and, therefore, to an election under s. 67 of the Act to receive his termination pay forthwith or to retain his recall rights because his lay-off exceeded 35 weeks. Section 54 of the Act prohibits an employer from terminating the employment of an employee who has been continuously employed for three or more months unless notice of termination of employment is given under ss. 57 and 58 of the Act, or termination pay is paid pursuant to s. 61. Section 55 establishes an exception for "prescribed employees", as defined in the Regulation. The term "prescribed employees" includes "an employee on a temporary lay-off" and an employee "who is on a temporary lay-off and does not return to work within a reasonable time after having been requested by his or her employer to do so". Sections 56(1) (c) and 56(2)(b) of the Act establish the general rule that an employee's employment will be deemed to have been terminated by operation of law if the employee's lay-off is 35 weeks or more in [page445] any period of 52 consecutive weeks. However, s. 56(2)(c) contemplates that the maximum 35-week temporary law-off period established under s. 56(2)(b) may be extended for employees represented by a trade union if an agreement exists between the employer and the trade union that provides for the recall of the employee and if the employer recalls the employee within the time fixed by the agreement. While the grievance in this case was pending, the employer issued a recall to work notice to M for a day labourer position. He rejected that offer but indicated that he would be interested in receiving a call if work as a welder-fitter became available. The employer subsequently sent a second recall to work notice recalling M as a welder-fitter. M had obtained alternate employment by then and he declined the second offer. The grievance was dismissed. The arbitrator found that the preconditions to an extension under s. 56(2)(c) were met in this case, as: M was a unionized worker; he was laid-off for almost 38 weeks at the time of the second recall; art. 8.03(7) of the collective agreement was an "agreement" within the meaning of s. 56(2)(c) of the Act that provided M with recall rights for a maximum of two years; and M was recalled to work within that two-year period. Because M was not entitled to termination pay, the statutory preconditions to an election under s. 67(1) of the Act were not satisfied. The union's application for judicial review of that award was dismissed. The Divisional Court held that a reasonableness standard applied to the review of the arbitrator's award and that the decision met that standard. The union appealed.

Held, the appeal should be allowed.

Per Cronk J.A.(Armstrong J.A. concurring): The Divisional Court erred in finding that the standard of review of the award was reasonableness. The arbitrator's decision concerned the interpretation of the collective agreement between the parties and various provisions of the Act and the Regulation (O. Reg. 288/01). The legislation in issue lies at the core of the work of labour arbitrators in the employment law sector. It is both centrally related to their expertise and intimately connected to their mandate. Moreover, the interpretive issues here have important implications in the labour relations and employment law domains. They arise in the context of a powerful, although not full, privative clause under the Labour Relations Act, 1995, S.O. 1995, c. 1, Sch. A and employment standards legislation that itself invites strong deference to the arbitral process. The applicable standard of review is patent unreasonableness.

The arbitrator's interpretation of s. 56(2)(c) of the Act was inconsistent with and undermined the purpose of the election process under s. 67(1) of the Act. That interpretation suggested that an agreement between an employer and a union establishing a recall period for laid-off unionized employees will operate in all circumstances to both extend the term of a temporary lay-off and to defer any entitlement of the employee to termination pay for the full duration of the contractual recall period. This misconceives the fundamental purpose of the termination pay scheme under the Act and the import of ss. 56(2)(c) and 67(1), resulting in an interpretation that is patently unreasonable. The triggering event to achieve a temporary lay-off of more than 35 weeks duration pursuant to a s. 56(2)(c) agreement is the timing of the employer's recall offer. A s. 56(2)(c) agreement is effective so long as the employee is recalled within the time set out in the agreement between the employer and the union. In M's case, the maximum recall period set by his collective agreement was two years. But when M's lay-off reached the 35-week mark, he had not been recalled by the employer "within the time set out" in the collective agreement so as to trigger the application of s. 56(2)(c). Indeed, he had not been recalled at all. At that point, therefore, s. 56(2)(c) did not apply to M and his entitlement to termination pay and to an election under s. 67(1) were engaged. Accordingly, M should have been [page446] afforded the opportunity after he had been laid off for 35 weeks to elect to receive his termination pay and formally abandon his unexpired contractual recall rights. The fact that the parties did not follow the election process established by s. 67 of the Act could not deprive M of the termination pay to which he was otherwise entitled.

Per Laskin J.A. (concurring in the result): The standard of review of the arbitrator's decision was patent unreasonableness.

The arbitrator's award was patently unreasonable for three reasons: it was contrary to the intention of the parties; it made the employee's election in s. 67 of the Employment Standards Act meaningless; and it was at odds with the Ministry of Labour's Policy and Interpretation Manual. The determination that art. 8.03(7) of the collective agreement -- the seniority rights clause -- was an agreement under s. 56(2)(c) was patently unreasonable. The collective agreement was negotiated and came into effect over a year before the new Act took effect. The former Act contained no provision entitling a trade union and an employer to extend a temporary lay-off beyond 35 weeks. It was utterly unreasonable to conclude that the parties intended a standard seniority rights clause, typical of virtually every collective agreement, to be an agreement for the purpose of s. 56(2)(c). To establish an agreement under s. 56(2)(c) that would oust or at least defer a well-established right, the language the parties use must show that they directed their minds to this ouster or deferral. The arbitrator's decision rendered the election in s. 67 of the Act meaningless and undermined the purpose of the election. At its core, it failed to recognize that termination under the Act and termination under the collective agreement are quite distinct. An employee may be entitled to statutory termination pay at 35 weeks while still enjoying rights, including recall rights, under the collective agreement. Section 67 legislates their co-existence. The arbitrator's decision obliterated it. Finally, the Manual, while recognizing that the Act does not contain explicit requirements for a s. 56(2)(c) agreement, nonetheless suggests that there must be some evidence the agreement contemplated avoiding a termination that would otherwise be deemed to have occurred.

APPEAL from the judgment of the Divisional Court (Ferrier, Ground and Pitt JJ. of the Superior Court of Justice, sitting as the Divisional Court), [2004] O.J. No. 4185 (Div. Ct.) dismissing an application for judicial review of an arbitration award made on June 3, 2003.

Lakeport Beverages v. Teamsters Local Union 938 (2005), 2005 29339 (ON CA), 77 O.R. (3d) 543, [2005] O.J. No. 3488, 258 D.L.R. (4th) 10, 2005 C.L.L.C. 220-057, 34 Admin. L.R. (4th) 60 (C.A.); McLeod v. Egan, 1974 12 (SCC), [1975] 1 S.C.R. 517, 46 D.L.R. (3d) 150, 2 N.R. 443; Walker Exhausts and United Steelworkers of America Local 2894 (Re) (1981), 1981 1837 (ON SC), 32 O.R. (2d) 507, 122 D.L.R. (3d) 134, 8 A.C.W.S. (2d) 46 (Div. Ct.), consd Other cases referred to Alberta Union of Provincial Employees v. Lethbridge Community College, 2004 SCC 28, [2004] 1 S.C.R. 727, [2004] S.C.J. No. 24, 348 A.R. 1, 238 D.L.R. (4th) 385, 319 N.R. 201, 321 W.A.C. 1, 26 Alta. L.R. (4th) 201, 11 Admin. L.R. (4th) 1; Domtar Inc. v. I.W.A.-Canada, Local 2995, [2004] O.L.A.A. No. 392, [2004] L.V.I. 3493-7 (Arb. Bd.); Dr. Q. v. College of Physicians and Surgeons of British Columbia, [2003] 1 S.C.R. 226, [2003] S.C.J. No. 18, 223 D.L.R. (4th) 599, 302 N.R. 34, [2003] 5 W.W.R. 1, 2003 SCC 19, 11 B.C.L.R. (4th) 1; Elementary Teachers Federation of Ontario v. Toronto District School Board, 2005 36712 (ON CA), [2005] O.J. No. 4368 (C.A.); Elementary Teachers' Federation of Ontario v. Toronto District School Board, 2004 1652 (ON SCDC), [2004] O.J. No. 2886, 188 O.A.C. 302, 21 Admin. L.R. (4th) 1, 132 A.C.W.S. (3d) 280 (S.C.J.); I.P.C. v. Norampac Inc., 2002 Carswell Ont. 5402, L.V.I. 3380-11 (Ont. Arb. Bd.); [page447] Law Society of New Brunswick v. Ryan, [2003] 1 S.C.R. 247, [2003] S.C.J. No. 17, 257 N.B.R. (2d) 207, 223 D.L.R. (4th) 577, 302 N.R. 1, 674 A.P.R. 207, 2003 SCC 20, 31 C.P.C. (5th) 1; Ontario English Catholic Teachers' Assn. v. Lanark, Leeds and Grenville County Roman Catholic Separate School Board, 1998 1644 (ON CA), [1998] O.J. No. 3366, 164 D.L.R. (4th) 429, 9 Admin. L.R. (3d) 241, 81 A.C.W.S. (3d) 965 (C.A.); Pacaldo v. Dolega-Kamienski Estate, [2003] O.E.S.A.D. No. 72, [2003] O.L.R.B. Rep. 45; Pushpanathan v. Canada (Minister of Citizenship and Immigration), 1998 778 (SCC), [1998] 1 S.C.R. 1222, [1998] S.C.J. No. 77, [1998] 1 S.C.R. 982, [1998] S.C.J. No. 46, 160 D.L.R. (4th) 193, 226 N.R. 201; R. v. Nowegijick, 1983 18 (SCC), [1983] 1 S.C.R. 29, 144 D.L.R. (3d) 193, 46 N.R. 41, 83 D.T.C. 5041; Rizzo & Rizzo Shoes Ltd. (Re), 1998 837 (SCC), [1998] 1 S.C.R. 27, [1998] S.C.J. No. 2, 36 O.R. (3d) 418n, 154 D.L.R. (4th) 193, 221 N.R. 241, 50 C.B.R. (3d) 163, 33 C.C.E.L. (2d) 173, 98 C.L.L.C. 210-006 (sub nom. Ontario Ministry of Labour v. Rizzo & Rizzo Shoes Ltd., Adrien v. Ontario Ministry of Labour); Royal Doulton Canada Ltd. v. Retail Wholesale Canada, CAW Division, Local 414 (Mattingly Grievance), 2003 89639 (ON LA), [2003] O.L.A.A. No. 199, 117 L.A.C. (4th) 40 (Arb. Bd.); Toronto (City) Board of Education v. Ontario Secondary School Teachers' Federation, District 15, 1997 378 (SCC), [1997] 1 S.C.R. 487, [1997] S.C.J. No. 27, 144 D.L.R. (4th) 385, 208 N.R. 245, 25 C.C.E.L. (2d) 153; Toronto Catholic District School Board v. Ontario English Catholic Teachers' Assn. (Toronto Elementary Unit) (2001), 2001 8597 (ON CA), 55 O.R. (3d) 737, [2001] O.J. No. 3748, 149 O.A.C. 328, 39 Admin. L.R. 188, 108 A.C.W.S. (3d) 298 (C.A.); Victorian Order of Nurses and O.N.A. (Re) (2004), 2004 94647 (ON LA), 134 L.A.C. (4th) 199 (Ont. Arb. Bd.); Voice Construction Ltd. v. Construction & General Workers' Union, Local 92, [2004] 1 S.C.R. 609, [2004] S.C.J. No. 2, 238 D.L.R. (4th) 217, 318 N.R. 332, [2004] 7 W.W.R. 411, 2004 SCC 23, 29 Alta. L.R. (4th) 1, 14 Admin. L.R. (4th) 165 Statutes referred to Employment Standards Act, R.S.O. 1990, c. E.14 Employment Standards Act, 2000, S.O. 2000, c. 41, ss. 1 [as am.], 54, 55, 56 [as am.], 57, 58, 61 [as am.], 67, 99, 100, 101 Labour Relations Act, 1995, S.O. 1995, c. 1, Sch. A, s. 48 [as am.] Social Contract Act, 1993, S.O. 1993, c. 5 Rules and regulations referred to Termination and Severance Employment, O. Reg. 288/01, s. 2 [as am.] Authorities referred to Ontario, Employment Standards Branch, Employment Standards Act 2000: Policy and Interpretation Manual (Scarborough: Carswell, 2001) Ontario, Ministry of Labour, Employment Standards Act, 2000 Policy and Interpretation Manual, vol. 2, looseleaf (Toronto: Carswell, 2003) Sullivan, R., Sullivan and Driedger on the Construction of Statutes, 4th ed. (Markham: Butterworths Canada Ltd., 2002)

Anthony F. Dale, for appellant. Daniel J. Shields, for respondent. [page448]

CRONK J.A. (ARMSTRONG J.A. concurring):--

I. Overview

1In Ontario, the statutory obligations of employers and the rights of employees upon termination of employment are governed by employment standards legislation. In September 2001, the Employment Standards Act, R.S.O. 1990, c. E.14 (the "ESA") was replaced by the Employment Standards Act, 2000, S.O. 2000, c. 41 (the "Act"). The new Act, like the ESA before it, obliges employers to provide their employees with notice of termination, or termination pay in lieu of notice, upon termination of employment. This obligation does not extend to employees who are temporarily laid off from their employment, unless their employment is deemed at law to be terminated because the duration of their lay-off exceeds permissible statutory limits.

2In contrast to the former ESA, the Act contemplates that an agreement between an employer and a trade union may operate to extend a temporary lay-off for a unionized employee beyond what would otherwise be the statutory maximum duration of a temporary lay-off, so long as the employee is recalled to work within the time fixed by the agreement. If a timely recall occurs, the deemed termination of the employee's employment under the Act is avoided. In addition, subject to certain statutory preconditions, the Act provides employees with an election between receiving termination pay or retaining the right to be recalled to work.

3This appeal concerns the judicial review of an arbitrator's interpretation of the temporary lay-off and employee election provisions of the Act and associated regulations, in the context of a collective agreement that provided for employee recall and seniority rights in the workplace.

4In this case, when the temporary lay-off of a unionized employee exceeded 35 weeks, his trade union asserted that his employment was deemed at law to have been terminated, thereby entitling him to termination pay and to an election to either receive his termination pay forthwith or to retain his recall rights under the governing collective agreement.

5The employer disagreed, maintaining that the recall and seniority provisions of the collective agreement provided for an extended temporary lay-off, thus avoiding the deemed termination of the employee's employment.

6The union launched a grievance. The grievance was treated as a complaint that the employer had failed to recognize the employee's entitlements to termination pay and to an election concerning his termination pay and recall rights. While the grievance [page449] was pending, the employer twice recalled the employee to work but the employee declined both recall offers and did not return to work.

7The arbitrator concluded first, that the collective agreement constituted an agreement between the employer and the union within the meaning of the Act, which extended the duration of the employee's temporary lay-off. This meant that the employee was temporarily laid off and his employment had not been terminated on the dates of the grievance and the employer's recall offers. The arbitrator next concluded that, both because the employee was on a temporary lay-off and because he declined to return to work after being recalled, he was a "prescribed employee" within the meaning of the legislative termination pay scheme. Consequently, he was not entitled to termination pay or to elect to be paid termination pay. The arbitrator, therefore, dismissed the grievance.

8The union sought judicial review of the arbitrator's award. In brief reasons delivered on October 4, 2004, the Divisional Court held that a "reasonableness" standard of review applied to the review of the arbitrator's award. Assessed against this standard, the Divisional Court concluded that the arbitrator's analyses of the employee's status and entitlements under the Act were reasonable, thus precluding judicial intervention. The Divisional Court dismissed the union's application.

9The union appeals to this court. For the reasons that follow, I would allow the appeal. In my view, the Divisional Court erred by holding that a reasonableness standard of review applies in this case. I conclude that the arbitrator's award is reviewable on a standard of patent unreasonableness and that, on the facts of this case, the arbitrator's decision failed to meet that standard. Accordingly, the arbitrator's award cannot stand.

II. Background Facts

(1) Lay-off and recalls to work

10Effective May 24, 2001, Paul McCleary, a welder-fitter, was temporarily laid off by his employer, the respondent London Machinery Inc. (the "Employer"), due to work shortages. McCleary was a unionized employee.

11At the time of McCleary's lay-off, art. 8.03(7) of the collective agreement in force between the Employer and the appellant trade union (the "Union") provided him with recall rights for a maximum of two years:

8.03 An employee shall lose their [sic] seniority and will no longer be considered an employee of the [Employer] for any of the following reasons: [page450] . . .

(7) Is laid off and not recalled to work for a period equal to their [sic] seniority or a maximum of two (2) years, whichever is the lesser.

12In addition, art. 8.03(3) of the collective agreement provided that an employee would lose his or her seniority and no longer be considered an employee of the Employer if the employee was laid off and recalled to work but failed to return to work within seven days of the recall offer unless the employee gave a "reason satisfactory to the Plant Manager".

13On January 30, 2002, when McCleary had been laid off for almost 36 weeks, the Union launched a grievance on his behalf. During the grievance proceeding, the Union claimed that McCleary's employment was deemed at law to have been terminated and that he was entitled to termination pay and, therefore, to an election to receive his termination pay forthwith or to retain his recall rights because his lay-off exceeded 35 weeks.

14While the grievance was pending, the Employer issued a recall to work notice to McCleary for a labourer position effective February 11, 2002. McCleary rejected this offer. In so doing, he indicated that he would be interested in receiving a call from the Employer if work as a welder-fitter became available.

15Subsequently, on February 13, 2002, the Employer sent a second recall to work notice to McCleary, recalling him to work as a welder-fitter. By then, McCleary had obtained alternative employment and he declined the second recall offer. Neither McCleary nor the Union informed the Employer at any time prior to February 13, 2002 that McCleary wished to waive or renounce his recall rights.

16When McCleary did not return to work within seven days from the date of the second recall notice, the Employer formally ended the employment relationship.

(2) Termination pay scheme

17This appeal turns on the interpretation and application of the termination pay scheme established by the Act, together with O. Reg. 288/01 (the "Regulation"). As relevant to the issues on appeal, the Act provides:

TERMINATION OF EMPLOYMENT

No termination without notice

54. No employer shall terminate the employment of an employee who has been continuously employed for three months or more unless the employer,

(a) has given to the employee written notice of termination in accordance with section 57 or 58 and the notice has expired; or [page451]

(b) has complied with section 61.

Prescribed employees not entitled

55. Prescribed employees are not entitled to notice of termination or termination pay under this Part.

What constitutes termination

56(1) An employer terminates the employment of an employee for purposes of section 54 if,

(c) the employer lays the employee off for a period longer than the period of a temporary lay-off.

Temporary lay-off

(2) For the purpose of clause (1)(c), a temporary layoff is, . . .

(b) a lay-off of more than 13 weeks in any period of 20 consecutive weeks, if the lay-off is less than 35 weeks in any period of 52 consecutive weeks and,

(c) in the case of an employee represented by a trade union, a lay-off longer than a lay-off described in clause (b) where the employer recalls the employee within the time set out in an agreement between the employer and the trade union.

Temporary lay-off not termination

(4) An employer who lays an employee off without specifying a recall date shall not be considered to terminate the employment of the employee, unless the period of the lay-off exceeds that of a temporary lay-off.

Deemed termination date

(5) If an employer terminates the employment of an employee under clause (1)(c), the employment shall be deemed to be terminated on the first day of the lay-off.

Pay instead of notice

61(1) An employer may terminate the employment of an employee without notice or with less notice than is required under section 57 or 58 if the employer,

(a) pays to the employee termination pay in a lump sum equal to the amount the employee would have been entitled to receive under section 60 had notice been given in accordance with that section; and

(b) continues to make whatever benefit plan contributions would be required to be made in order to maintain the benefits to which the [page452] employee would have been entitled had he or she continued to be employed during the period of notice that he or she would otherwise have been entitled to receive.

ELECTION RE RECALL RIGHTS

Where election may be made

67(1) This section applies if an employee who has a right to be recalled for employment under his or her employment contract is entitled to,

(a) termination pay under section 61 because of a lay- off of 35 weeks or more; or

(b) severance pay.

Nature of election

(3) The employee may elect to be paid the termination pay or severance pay forthwith or to retain the right to be recalled.

Deemed abandonment

(5) An employee who elects to be paid shall be deemed to have abandoned the right to be recalled.

Employee represented by trade union

(7) If an employee who is represented by a trade union elects to retain the right to be recalled or fails to make an election,

(a) the employer and the trade union shall attempt to negotiate an arrangement for holding the money in trust, and, if the negotiations are successful, the money shall be held in trust in accordance with the arrangement agreed upon; and

(b) if the trade union advises the Director and the employer in writing that efforts to negotiate such an arrangement have been unsuccessful, the employer shall pay the termination pay and severance pay to which the employee is entitled to the Director in trust.

Where employee accepts recall

(8) If the employee accepts employment made available under the right of recall, the amount held in trust shall be paid out of trust to the employer and the employee shall be deemed to have abandoned the right to termination pay and severance pay paid into trust.

Recall rights expired or renounced

(9) If the employee renounces the right to be recalled or the right expires, the amount held in trust shall be paid to the employee and, if the right to be recalled had not expired, the employee shall be deemed to have abandoned the right. [page453]

ENFORCEMENT UNDER COLLECTIVE AGREEMENT

When collective agreement applies

99(1) If an employer is or has been bound by a collective agreement, this Act is enforceable against the employer as if it were part of the collective agreement with respect to an alleged contravention of this Act that occurs,

(a) when the collective agreement is or was in force;

18In addition, the Regulation contains the following provisions:

TERMINATION OF EMPLOYMENT

Employees not entitled to notice of termination or termination pay

2(1) The following employees are prescribed for the purposes of section 55 of the Act as employees who are not entitled to notice of termination or termination pay under Part XV of the Act: . . .

2. An employee on a temporary lay-off.

3. An employee who is on a temporary lay-off and does not return to work within a reasonable time after having been requested by his or her employer to do so.

(3) Arbitrator's award

19At the arbitration, the Union took the position that McCleary's employment was deemed at law to have been terminated because his lay-off exceeded 35 weeks and that, consequently, he was entitled to termination pay and to an election regarding his termination pay and recall rights [See Note 1 at the end of the document]. There was no suggestion that McCleary was also entitled to severance pay.

20The Employer resisted McCleary's grievance on several grounds. It argued that the recall rights established under art. 8.03(7) of the collective agreement constituted an agreement between the Employer and the Union within the meaning of s. 56(2)(c) of the Act, with the result that McCleary was still on a temporary lay-off after the expiry of 35 weeks from May 24, 2001, the effective date of his lay-off. Consequently, McCleary was a "prescribed employee" pursuant to ss. 2(1)2 and 2(1)7 of [page454] the Regulation because he was on a temporary lay-off and did not return to work when recalled by the Employer. As a "prescribed employee", he was not entitled to termination pay and, because entitlement to termination pay is a statutory precondition to the s. 67 election process, he was also not entitled to an election regarding termination pay and recall rights under s. 67 of the Act.

21The arbitrator accepted the Employer's argument. In dismissing the grievance, he made the following critical findings:

(i) by February 13, 2002, the date of the second recall notice, McCleary had been laid off for almost 38 weeks of the preceeding 52-week period;

(ii) the collective agreement constituted an agreement between the Employer and the Union within the meaning of s. 56(2) (c) of the Act;

(iii) McCleary, an employee represented by a trade union, was recalled to work by the Employer within the two-year recall period set out under art. 8.03(7) of the collective agreement. Thus, by operation of s. 56(2)(c) of the Act, McCleary was an employee on temporary lay-off on February 13, 2002;

(iv) both because McCleary was on temporary lay-off and because he did not accept his February 13, 2002 recall to work, he was a "prescribed employee" within the meaning of ss. 2(1)2 and 2(1)7 of the Regulation. Therefore, under s. 55 of the Act, he was not entitled to termination pay. Moreover, by virtue of art. 8.03(3) of the collective agreement, he lost his seniority rights and was no longer an employee of the Employer; and

(v) because McCleary was not entitled to termination pay, the statutory preconditions to an election under s. 67(1) of the Act were not satisfied.

(4) Divisional Court's decision

22The Divisional Court held that a reasonableness standard of review applied to the review of the arbitrator's award and that the arbitrator's decision met this standard. In brief reasons dismissing the Union's judicial review application, the Divisional Court stated (at para. 2):

In our view, the analysis by the arbitrator as to the Collective Agreement being an agreement for the purposes of s. 56(2)(c) of the [Act] and his analysis of Mr. McCleary's status as a prescribed employee to be [sic] reasonable analyses which led to the arbitrator reaching the conclusions set out in his award. [page455]

III. Issues

23I would frame the issues on appeal as follows:

(1) Did the Divisional Court err by concluding that reasonableness is the proper standard of review of the arbitrator's award?

(2) If the answer to (1) is "yes", did the arbitrator's award in this case meet the applicable standard of review?

IV. Analysis

(1) Standard of review

24There is no dispute that the pragmatic and functional approach applies in this case to identify the proper level of deference to the arbitrator's award: see Pushpanathan v. Canada (Minister of Citizenship and Immigration), 1998 778 (SCC), [1998] 1 S.C.R. 982, [1998] S.C.J. No. 46; Dr. Q. v. College of Physicians and Surgeons of British Columbia, 2003 SCC 19, [2003] 1 S.C.R. 226, [2003] S.C.J. No. 18; and Law Society of New Brunswick v. Ryan, 2003 SCC 20, [2003] 1 S.C.R. 247, [2003] S.C.J. No. 17. In my view, under that approach and on these facts, patent unreasonableness is the proper standard of review. I say this for several reasons.

25First, a strong privative clause is implicated in this case. Section 48(1) of the Labour Relations Act, 1995, S.O. 1995, c. 1, Sch. A (the "LRA") requires that every collective agreement "shall provide for the final and binding settlement by arbitration . . . of all differences between the parties arising from the interpretation, application, administration or alleged violation of the agreement". As well, s. 48(12)(j) of the LRA expressly confers authority on arbitrators to interpret and apply employmentûrelated statutes, despite any conflict between those statutes and the terms of a collective agreement. These provisions of the LRA support a high level of deference to the arbitrator's award.

26Second, in respect of unionized employees, the Act itself reflects a legislative intent that questions concerning the interpretation and enforcement of collective agreements and the Act be resolved through the arbitration process, where experienced arbitrators may bring to bear specialized expertise and competencies in employment and labour relations matters. Section 99(1) of the Act provides that where an employer is bound by a collective agreement, the Act is enforceable against the employer as if it were part of the collective agreement with respect to an alleged contravention of the Act that occurs when the collective agreement is or was in force. In turn, ss. 100 and 101 of the Act, which [page456] describe the manner of enforcement of the Act under a collective agreement, concern proceedings before arbitrators on matters related to alleged contraventions of the Act. Thus, the complaints and enforcement provisions of the Act also favour a strongly deferential approach to review of the arbitrator's award in this case.

27Third, in my opinion, relevant judicial authorities indicate that the patent unreasonableness standard of review is appropriate.

28For many years, the jurisprudence of this court and of the Supreme Court of Canada held that the decisions of Ontario labour arbitrators on questions concerning the interpretation of provisions of a collective agreement were reviewable on the highly deferential standard of patent unreasonableness: see Lakeport Beverages v. Teamsters Local Union 938 (2005), 2005 29339 (ON CA), 77 O.R. (3d) 543, [2005] O.J. No. 3488, 258 D.L.R. (4th) 10 (C.A.), at para. 20. This approach recognized that the interpretation of a collective agreement involved the direct application of a labour arbitrator's specialized expertise in the labour relations domain.

29In contrast, when the nature of the question in issue also involved the interpretation of "external" or "outside" legislation, less deference was generally accorded to an arbitrator's decision. However, in Toronto (City) Board of Education v. Ontario Secondary School Teachers' Federation, District 15, 1997 378 (SCC), [1997] 1 S.C.R. 487, [1997] S.C.J. No. 27, the Supreme Court of Canada stated at para. 39:

An exception to this rule may occur where the external statute is intimately connected with the mandate of the tribunal and is encountered frequently as a result.

Thus, where this exception applied, this court held that the more deferential standard of patent unreasonableness was engaged: see for example, Ontario English Catholic Teachers' Assn. v. Lanark, Leeds and Grenville County Roman Catholic Separate School Board, 1998 1644 (ON CA), [1998] O.J. No. 3366, 164 D.L.R. (4th) 429 (C.A.) and Toronto Catholic District School Board v. Ontario English Catholic Teachers' Assn. (Toronto Elementary Unit) (2001), 2001 8597 (ON CA), 55 O.R. (3d) 737, [2001] O.J. No. 3748 (C.A.).

30Then, in 2004, a new development occurred when the Supreme Court of Canada adopted the less stringent but nonetheless deferential standard of reasonableness, rather than patent unreasonableness, for review of the decisions of labour arbitrators acting under Alberta's labour relations legislation: see Voice Construction Ltd. v. Construction & General Workers' Union, Local 92, 2004 SCC 23, [2004] 1 S.C.R. 609, [2004] S.C.J. No. 2 and Alberta Union of Provincial Employees v. Lethbridge Community College, 2004 SCC 28, [2004] 1 S.C.R. 727, [2004] S.C.J. No. 24. These Alberta [page457] cases were distinguished in Lakeport Beverages on the basis of the differing judicial review provisions of the applicable Alberta and Ontario statutes. In particular, this court emphasized at para. 32 of Lakeport Beverages, the strong privative clause set out in s. 48(1) of the LRA, in contrast to the provisions of the provincial legislation at issue in the Alberta cases.

31Lakeport Beverages involved the review of an Ontario arbitrator's interpretation of the terms of a collective agreement concerning seasonal employees. As a result, the interpretive issue in that case focused solely on the terms of the collective agreement, an issue that fell squarely within the specialized expertise of a labour relations arbitrator. This suggested that the proper standard of review of the arbitrator's decision was the exacting standard of patent unreasonableness.

32More recently, in Elementary Teachers Federation of Ontario v. Toronto District School Board, 2005 36712 (ON CA), [2005] O.J. No. 4368 (C.A.), this court affirmed a decision of the Divisional Court applying the standard of reasonableness simpliciter to the review of an Ontario arbitration board's decision that dismissed a grievance arising from the treatment of a teacher returning to the workplace following maternity leave.

33In contrast to Lakeport Beverages (where the issue in dispute concerned only the interpretation of a collective agreement), the question before the arbitration board in Elementary Teachers involved the interpretation of provisions of the ESA, the employment standards legislation then in force in Ontario. The issue on judicial review of the board's decision was whether a standard of "correctness" or reasonableness applied. The Divisional Court concluded that the proper standard of review in the circumstances was reasonableness and that the board's decision met that standard. On appeal, this court stated (at paras. 11-13):

We agree with the Divisional Court that there have been developments since McLeod v. Egan, supra, that justify re- examining the appropriate standard of review of the decision of a grievance arbitrator interpreting the Employment Standards Act. These developments also include the decision of the Supreme Court of Canada in Toronto (City) Board of Education v. O.S.S.T.F., District 15, 1997 378 (SCC), [1997] 1 S.C.R. 487. In that case, at para. 39, Cory J. indicated that an exception to the general rule that the findings of an arbitration board concerning the interpretation of "outside" legislation will generally be reviewed on a correctness standard "may occur where the external statute is intimately connected with the mandate of the tribunal and is encountered frequently as a result."

We also agree with the Divisional Court's conclusion that, on the whole, the features of this case favouring deference outweigh those features favouring a correctness standard. The features favouring deference [page458] include: the presence of a privative clause in s. 48(1) of the Labour Relations Act, the legislative changes referred to above indicating a recognition of the expertise of arbitrators in interpreting the provisions of the Employment Standards Act, and the fact- driven nature of the interpretation raised by the sections in issue.

Further, given that we are satisfied that the decision of the board of arbitration was reasonable, we find it unnecessary to consider whether a distinction between the standards of patent unreasonableness and reasonableness is appropriate on the facts of this case.

(Emphasis added)

34Thus, the decision of this court in Elementary Teachers did not depart from the previously established rule that a standard of patent unreasonableness applied to review of a labour arbitrator's award that was based on the interpretation of a collective agreement and 'outside' legislation that was intimately connected with the arbitrator's expertise and mandate. Moreover, Lakeport Beverages did not involve consideration of this issue because the interpretative inquiry in that case was confined to consideration of the provisions of a collective agreement.

35In this case, the Divisional Court's conclusion that a standard of reasonableness applied to the arbitrator's award was based on Elementary Teachers' Federation of Ontario v. Toronto District School Board, 2004 1652 (ON SCDC), [2004] O.J. No. 2886, 188 O.A.C. 302 (S.C.J.). The subsequent decisions of this court in Elementary Teachers and Lakeport Beverages were not available to the Divisional Court.

36Nor does it appear that the decisions of this court in Lanark and Toronto Catholic District School Board were drawn to the attention of the Divisional Court.

37The arbitrator's decision in this case concerned the interpretation of the collective agreement between the parties and various provisions of the Act and the Regulation. The legislation in issue lies at the core of the work of labour arbitrators in the employment law sector. It is both centrally related to their expertise and intimately connected to their mandate. Moreover, the interpretive issues in play here have important implications in the labour relations and employment law domains. They arise in the context of a powerful, although not full, privative clause under the LRA and employment standards legislation that itself invites strong deference to the arbitral process. These factors militate in favour of a high degree of deference to the arbitrator's award.

38I conclude that the Divisional Court erred by holding that the governing standard of review in this case is reasonableness. The applicable standard is patent unreasonableness. [page459] The remaining question is whether the arbitrator's award met this standard.

(2) Reasonableness of the arbitrator's award

(i) Arbitrator's reasoning

39McCleary was recalled to work by the Employer as a welder-fitter on February 13, 2002. By January 30, 2002, when his grievance was filed, he had been laid off for almost 36 weeks of the immediately preceeding 52 weeks. The issue before the arbitrator was whether, in these circumstances, McCleary's employment was deemed to be terminated at the time of his grievance, thereby entitling him to termination pay under s. 61 and to an election concerning his termination pay and recall rights under s. 67.

40The arbitrator rejected the Union's contention that McCleary's employment was deemed under s. 56 of the Act to have been terminated by the Employer because the duration of his lay-off exceeded 35 weeks. Instead, he held that McCleary was on a temporary lay-off at the time of his February 13, 2002 recall notice. In his view, this finding meant that McCleary was not entitled to termination pay under s. 61 or to participate in an election concerning his termination pay and recall rights under s. 67 of the Act.

41The core of the arbitrator's reasoning was as follows:

Section 56(2)(c) of the Act makes clear [McCleary's] status [as of February 13, 2002] continued to be that of an employee on temporary lay-off because first of all he was an employee represented by a trade union and, secondly, he was on a lay-off longer than either 13 of 20 consecutive weeks or 35 of 52 consecutive weeks and was recalled to work by the employer inside the time set out in an agreement between the employer and the trade union. That agreement in the instant case is found in the collective agreement and provides Mr. McCleary with recall rights for two years. The collective agreement stipulates that an employee who is laid off has both the right to bump [other employees eligible for recall to work] and to be recalled to work provided he or she retains seniority, and is therefore still an employee. Seniority, by Art. 8.03(7) [of the collective agreement], is lost when an employee who is laid off and not recalled to work for a period equal to their seniority or a maximum of two years, whichever is lesser. [McCleary] had four years of seniority at the date he was laid off and so retained seniority for two years. As such, Mr. McCleary's status with the company in the period following May 24, 2001 to the time he lost seniority was that of being on temporary lay-off.

We turn to address the matter of whether the circumstances of [McCleary's] situation are such as to entitle him to make an election. The first of the tests provided in s. 67(1) is whether Mr. McCleary had a right to be recalled for [page460] employment. The answer must be that he did. The second test in s. 67(1) is whether Mr. McCleary 'is entitled to termination pay under section 61 because of a lay-off of 35 weeks or more', and it is noted that in order to meet this test it is not sufficient just to have been laid off for thirty five weeks or more. There must also be entitlement to termination pay under section 61. Section 61 addresses the matter of an employer providing termination pay to an employee instead of giving the sufficient notice of termination required under s. 57 and s. 58 of the Act. In the case of Mr. McCleary he does not possess this entitlement to termination pay under s. 61 as he is a 'prescribed' employee by virtue of s. 2(1)(2) [sic] of Reg. 288/01 of the [Act] which stipulates that an employee on a temporary lay-off is a 'prescribed' employee, and under s. 55 of the Act 'prescribed' employees are not entitled to notice of termination or termination pay under Part XV of the Act. Section 61 falls within Part XV of the Act. Accordingly it must be concluded for these foregoing reasons that Mr. McCleary did not meet the requirements of the Act that would entitle him to make an election under s. 67(1) of the [Act] during the time of his temporary lay-off from employment.

Shortly after being recalled by the Employer on February 13, 2002 to work in his previous job of a welder-fitter, Mr. McCleary notified the [Employer] that he would not be returning to work at London Machinery. Subsequently, Mr. McCleary did not return to work at London Machinery within seven days of February 13, 2002 and, indeed, did not return at all. Article 8.03(3) of the collective agreement provides that an employee loses his seniority and is no longer an employee of the [Employer] when he is laid off and fails to report to work within seven days of the mailing date of the recall letter unless he or she gives a reason satisfactory to the Plant Manager. In this instance, and having decided to work elsewhere, Mr. McCleary therefore lost seniority and no longer remained an employee of the [Employer]. Mr. McCleary is not entitled under the Act to receive termination pay in this situation either, in that the Act classifies him to be a 'prescribed' employee. By section 2(1)(7) [sic] of [the] Regulation ... Mr. McCleary is a 'prescribed' employee because he was an employee on temporary lay-off who did not return to work within a reasonable period after having been requested by his employer to do so; indeed, he did not return at all. Section 55 of the Act stipulates that 'prescribed' employees are not entitled to notice of termination or termination pay.

(ii) Legislative scheme

42The key elements of the current legislative termination pay scheme, as relevant to the issues on appeal, may be summarized as follows.

43First, s. 54 of the Act prohibits an employer from terminating the employment of an employee who has been continuously employed for three or more months unless notice of termination of employment is given under ss. 57 and 58 of the Act, or termination pay is paid pursuant to s. 61 of the Act. No notice of termination was provided to McCleary. As a result, he was entitled to termination pay if, in the circumstances, his employment was terminated by the Employer. [page461]

44Section 55 of the Act, however, establishes an exception for "prescribed employees" to the s. 54 right to notice of termination or termination pay. Under s. 55, "prescribed employees", as defined in the Regulation, are not entitled to notice of termination or termination pay. The term "prescribed employees" includes "an employee on a temporary lay-off" (s. 2(1)2 of the Regulation) and an employee "who is on a temporary lay-off and does not return to work within a reasonable time after having been requested by his or her employer to do so" (s. 2(1)7 of the Regulation).

45The Act next defines what constitutes a deemed termination of employment. Section 56(1)(c) states that an employer terminates the employment of an employee for the purpose of s. 54 if, "the employer lays the employee off for a period longer than the period of a temporary lay-off". Section 56(2)(b) of the Act, in turn, provides in part that, for the purpose of s. 56(1)(c), a "temporary lay-off" is a "lay-off of more than 13 weeks in any period of 20 consecutive weeks, if the lay-off is less than 35 weeks in any period of 52 consecutive weeks".

46In combination, therefore, ss. 56(1)(c) and 56(2)(b) establish the general rule that an employee's employment will be deemed to have been terminated, by operation of law, if the employee's lay-off is 35 weeks or more in any period of 52 consecutive weeks. In this case, because McCleary's lay-off exceeded 35 weeks, his lay-off was "longer than the period of a temporary lay-off" under ss. 56(1)(c) and 56(2)(b). Thus, but for the potential operation of s. 56(2)(c) of the Act, his employment was deemed to have been terminated under the Act as soon as his lay-off exceeded 35 weeks.

47However, s. 56(2)(c) affords a mechanism to avoid this deemed termination of employment rule. It contemplates that, in certain circumstances, the maximum 35-week temporary lay-off period established under s. 56(2)(b) may be extended for employees represented by a trade union.

48There are three preconditions to such an extension under s. 56(2)(c): (i) the employee must be represented by a trade union; (ii) an agreement must exist between the employer and the trade union that provides for the recall of the employee; and (iii) the employer must recall the employee within the time fixed by the agreement. As I discuss later in these reasons, s. 56(2)(b)(vi) of the Act contains a similar provision, with appropriate adjustments, for non-unionized employees.

49The arbitrator concluded that these preconditions were met in this case, with the result that McCleary remained on temporary lay-off when his grievance was filed and at the time of his [page462] February 13, 2002 recall notice. The arbitrator held that McCleary was a unionized employee, that he was laid-off for almost 38 weeks at the time of his February 13, 2002 recall, that art. 8.03(7) of the collective agreement was an "agreement" within the meaning of s. 56(2)(c) of the Act that provided McCleary with recall rights for a maximum of two years and, finally, that McCleary was recalled to work within that two-year period. Of these findings by the arbitrator, only his holding that art. 8.03(7) of the collective agreement constituted an agreement for the purpose of s. 56(2)(c) of the Act is in issue on this appeal.

(iii) Union's position

50The Union's primary position before this court is that the arbitrator's decision is unreasonable because the arbitrator erred in his interpretation of s. 56(2)(c) of the Act. The Union submits that the arbitrator's interpretation of s. 56(2)(c): (i) is inconsistent with established authorities concerning interference with statutory employment standards; (ii) is not supported by the language employed in s. 56(2) (c), when considered in the context of the language used in other provisions of the Act; and (iii) undermines the purpose of the election process established by s. 67 of the Act. I will consider each of these submissions in turn.

(a) Suggested content of section 56(2)(c) agreements

51The Union argues that a s. 56(2)(c) agreement must meet two content requirements. First, it must specifically address the duration of a temporary lay-off in the context of the deemed termination of employment that would otherwise occur under the Act after the expiry of 35 weeks of lay-off. Second, it must provide the time within which the employee will be recalled. Absent such specificity, the Union argues, an agreement falls short of the type of agreement envisaged by s. 56(2)(c) of the Act. I disagree.

52Support for the Union's interpretation of s. 56(2)(c) is found in the Ministry of Labour's Employment Standards Act, 2000 -- Policy and Interpretation Manual, vol. 2, looseleaf (Toronto: Carswell, 2003) at 19-31. However, the content requirements sought to be imposed by the Union on s. 56(2)(c) agreements are not reflected in the Act. There is no indication in s. 56(2)(c) or elsewhere in the Act of a legislative intent that agreements under s. 56(2)(c) must specify the duration of a temporary lay-off in the context of the termination pay provisions of the Act, or effectively contain a commitment by the employer that the laid off employee will be recalled within a fixed time. [page463]

53The only temporal requirement of s. 56(2)(c) is that an agreement between an employer and a trade union establish the period during which an employee is entitled to be recalled to work, if work recalls occur. Article 8.03(7) of the collective agreement in this case satisfied s. 56(2)(c) to the extent that it provided for the preservation of seniority rights and status as an employee if the employee was recalled to work by the Employer within a period equal to the lesser of the employee's seniority or a maximum of two years.

54It is for the legislature, not the courts, to introduce the type of restrictions urged by the Union on s. 56(2)(c) agreements. I would add that while the Ministry of Labour's Manual concerning the Act is instructive, it is not determinative of the meaning or requirements of s. 56(2)(c); nor can it be assumed that it reflects the legislature's intent.

55The Union argues that because the Act is remedial, benefits-conferring legislation, the termination pay provisions must receive a liberal construction that is consistent with the contemporary approach to statutory interpretation. I agree. This requires that the words of the Act be interpreted in their entire context and in their grammatical and ordinary sense, according to the scheme and object of the Act and the intention of the legislature: see Rizzo & Rizzo Shoes Ltd. (Re), 1998 837 (SCC), [1998] 1 S.C.R. 27, [1998] S.C.J. No. 2, at paras. 21, 22, 24, 25 and 36.

56But this interpretive approach does not mean that limiting words are to be imported into s. 56(2)(c) when such a restrictive construction of the section is not supported by the language employed by the legislature. In this case, although the content restrictions urged by the Union may be desirable in the interests of protecting laid off employees, no signal of a legislative intention to impose such requirements arises from s. 56(2)(c) or from the context in which that section appears in the termination pay scheme detailed under the Act.

57The Union relies on McLeod v. Egan, 1974 12 (SCC), [1975] 1 S.C.R. 517, 46 D.L.R. (3d) 150 and Walker Exhausts and United Steelworkers of America Local 2894 (Re) (1981), 1981 1837 (ON SC), 32 O.R. (2d) 507, 122 D.L.R. (3d) 134 (Div. Ct.) and related cases to contend that any interference with a statutory employment standard, whether effected by legislation or agreement, must be expressed in clear and explicit language. In my view, these cases do not assist the Union.

58Both McLeod and Walker Exhausts predate the current Act. Unlike this case, these decisions concerned the ability of an employer, absent express agreement, to discipline an employee for failing to work excess hours. They were not directed at temporary lay-offs or consensual agreements between a trade union [page464] and an employer concerning the preservation of seniority and recall rights in the workplace.

59More importantly, in my opinion, the language of s. 56(2)(c) of the Act is clear. It provides for an agreement between an employer and a union, in respect of unionized employees, that can bring about a temporary lay-off of any duration so long as the requirements of s. 56(2)(c) are met. In this respect, to the extent that a s. 56(2)(c) agreement "interferes" with an employee's right to termination pay by extending the period of a temporary lay-off, this is accomplished by unambiguous language.

60This does not mean, however, that the duration of a temporary lay-off will be extended automatically upon an employer and a trade union entering into an agreement regarding recall rights. The key to engagement of s. 56(2)(c) is the fact of a timely recall offer by the employer. In my view, to trigger the extension of a temporary lay-off under s. 56(2)(c), the employer's recall must occur before the employment of the employee is otherwise deemed to have been terminated under the Act and, in all events, within the maximum recall period fixed by the agreement between the employer and the trade union. I return to discuss this issue later in these reasons.

(b) Assertion of incompatibility

61The Union next submits that the arbitrator's interpretation of s. 56(2)(c) is unreasonable because it is incompatible with other provisions of the Act. It points out that, in contrast to other sections of the Act, s. 56(2)(c) refers only to an "agreement" between an employer and a trade union, not to a collective agreement or an "employment contract". The latter term is defined under s. 1(1) of the Act as including a collective agreement.

62The Union argues that the omission in s. 56(2)(c) of any reference to collective agreements signifies a legislative intent that "ordinary" collective agreements, namely, those that provide for recall rights but that do not specifically address the concepts of temporary lay-off and termination pay, are not sufficient to affect the termination pay rights of laid off employees.

63The Union points out that s. 56(2)(b)(vi) of the Act permits an employer and a non-unionized employee to make an "agreement" extending the term of a temporary lay-off to a maximum of 35 weeks. The Union contends that the word "agreement" under s. 56(2)(c) is employed in that section in a manner analogous to its use in s. 56(2)(b)(vi) and, therefore, that a s. 56(2)(c) agreement must expressly address the duration of an extended lay-off as is required of a s. 56(2)(b) (vi) agreement. [page465]

64I would not give effect to these submissions for several reasons. First, counsel for the Union candidly acknowledged before this court that a s. 56(2)(c) agreement can include a collective agreement. During oral argument, the Union's position changed from the assertion that an "ordinary" collective agreement can never constitute a s. 56(2)(c) agreement, to the claim that the collective agreement in this case was insufficient for that purpose due to the lack of particularity that I have mentioned. Thus, the Union accepts that a sufficiently specific collective agreement can qualify as a s. 56(2)(c) agreement.

65Second, in my view, the word "agreement" in s. 56(2)(c) enjoys an expansive meaning. It can include a collective agreement or the provisions of a collective agreement, as well as an employment contract that is not a collective agreement, if the subject matter of the provision or agreement in question is recall rights and an employee's seniority rights and employee status are preserved for a fixed term. That occurred in this case.

66Third, I do not agree that s. 56(2)(b)(vi) establishes content requirements for an "agreement" under s. 56(2)(c). Both sections refer simply to an "agreement", as opposed to an "employment contract" or an agreement subject to specific content restrictions. The type of agreement envisaged by both sections is an agreement concerning recall rights. One of the distinguishing features of the two sections is that s. 56(2)(c) is concerned with employees who are represented by a trade union and, therefore, with agreements between employers and trade unions, whereas s. 56(2)(b)(vi) is directed at non- unionized employees and, hence, refers to agreements made directly between an employer and the affected employee.

67Another significant difference between ss. 56(2)(c) and 56(2)(b)(vi) of the Act is that the latter section is qualified by the introductory language of s. 56(2)(b), which defines a temporary lay-off, in part, as a lay-off of "less than 35 weeks in any period of 52 consecutive weeks". This language is immediately followed by the conjunctive word "and". In effect, therefore, a temporary lay-off under s. 56(2)(b)(vi) cannot exceed 35 weeks. In contrast, s. 56(2)(c) is a 'stand-alone' section that is not subject to the introductory language of s. 56(2)(b). Thus, the organizational structure of the Act indicates that a s. 56(2)(c) agreement, unlike a s. 56(2)(b) (vi) agreement, need not concern only lay-offs of less than 35 weeks.

68Finally, I do not accept that the use of the phrase "employment contract" in s. 67 of the Act, in contrast to s. 56(2)(c) of the Act, signifies an intention that the term "agreement" in s. 56(2)(c) is to be read restrictively. In my view, the term "employment contract" in [page466] s. 67(1), which includes but is not limited to a collective agreement, is simply intended to confirm that an election under s. 67(1) is available to unionized and non-unionized employees alike if the preconditions to entitlement to an election under s. 67(1) are otherwise met.

(c) Section 67 election process

69The Union also submits that the arbitrator's interpretation of s. 56(2)(c) is unreasonable because it is inconsistent with and undermines the purpose of the election process under s. 67(1) of the Act. I agree. In my view, this flaw in the arbitrator's analysis renders his award patently unreasonable.

70Section 67(1) provides for an election regarding termination pay and recall rights in defined circumstances. It does not apply unless: (i) the employee has a right to be recalled for employment under his or her employment contract (which, by virtue of s. 1(1) of the Act, includes a collective agreement); and (ii) the employee is "entitled" to termination pay under s. 61 because of a lay-off of 35 weeks or more, or the employee is entitled to severance pay. There is no dispute that McCleary enjoyed recall rights under the collective agreement, that his lay-off exceeded 35 weeks and that he was not entitled to severance pay. The issue, therefore, is whether he was "entitled" to termination pay under s. 61 because his lay-off exceeded 35 weeks.

71The arbitrator concluded that he was not so entitled. The arbitrator found that until McCleary rejected the Employer's recall offers, he remained on a temporary lay-off in light of the application of s. 56(2)(c) of the Act to the collective agreement between the Employer and the Union. Accordingly, he was a "prescribed employee" and, pursuant to s. 55 of the Act, he was not entitled to termination pay under s. 61 of the Act. In the arbitrator's view, this disentitled McCleary from any election right under s. 67(1) of the Act.

72The Employer argues that the arbitrator's interpretation of s. 56(2)(c) in this context is consistent with the decisions of other arbitrators: see for example, Royal Doulton Canada Ltd. v. Retail Wholesale Canada, C.A.W. Division, Local 414 (Mattingly Grievance), 2003 89639 (ON LA), [2003] O.L.A.A. No. 199, 117 L.A.C. (4th) 40 (Arb. Bd.); Victorian Order of Nurses and O.N.A. (Re) (2004), 2004 94647 (ON LA), 134 L.A.C. (4th) 199 (Arb. Bd.); Domtar Inc. v. I.W.A.-Canada, Local 2995, [2004] O.L.A.A. No. 392 [2004] L.V.I. 3493-7 (Ont. Arb. Bd.); and Pacaldo v. Dolega- Kamienski Estate, [2003] O.E.S.A.D. No. 72, [2003] O.L.R.B. Rep. 45. In particular, in Royal Doulton and Domtar Inc., the arbitrators accepted that the relevant provisions of collective [page467] agreements, which contemplated the preservation of recall rights for a specific period, had the effect of extending the term of the affected employee's temporary lay- off where the employee was recalled within the period specified in the provisions in issue. These cases essentially hold that the intent of s. 56(2)(c) is to tie the duration of a temporary lay-off of a unionized employee to the employee's recall period where the recall period is provided for by agreement between the employer and a trade union.

73These decisions, as well as the arbitrator's interpretation in this case of s. 56(2)(c), suggest that an agreement between an employer and a union establishing a recall period for laid off unionized employees will operate in all circumstances to both extend the term of a temporary lay-off and to defer any entitlement of the employee to termination pay for the full duration of the contractual recall period. In my opinion, this misconceives the fundamental purpose of the termination pay scheme under the Act and the import of ss. 56(2)(c) and 67(1) of the Act, resulting in an interpretation of the interplay between ss. 56(2)(c) and 67(1) of the Act that is patently unreasonable. I reach this conclusion for the following reasons.

74First, under the arbitrator's analysis, an employer could lay-off a unionized employee who enjoys recall rights under his or her collective agreement and escape any obligation to pay termination pay until the employee's recall period ends. Under this reasoning, the entitlement to termination pay for such an employee would not arise until the employee's recall rights no longer exist.

75However, the election process under s. 67 of the Act is predicated on an entitlement to termination pay under s. 61 arising while recall rights are subsisting. For this reason, s. 67 provides for an election between the acceptance of termination pay or the retention of recall rights. Thus, if an entitlement to termination pay under s. 61 cannot arise in the face of a s. 56(2)(c) agreement until the expiry of the affected employee's recall period under the agreement, as the arbitrator effectively held, no election would be possible because the employee's recall rights would have ceased to exist before the employee was eligible for an election. This interpretation strips the s. 67(1) election process of any practical meaning and removes any possibility of its application to McCleary and similarly-situated employees.

76Second, the arbitrator's analysis of the impact under s. 56(2)(c) of the recall provision in the collective agreement on McCleary's rights under s. 67 is inconsistent with the purpose of the termination pay scheme established by the Act. I agree with the Union that the statutory requirement to pay termination pay in lieu of notice of termination is intended to cushion [page468] laid off employees against the adverse effects of economic dislocation that may flow from the absence of an opportunity to search for alternative employment: see Rizzo, supra, at paras. 25 and 26. On the arbitrator's analysis of the statutory termination pay provisions, a laid off employee like McCleary could be denied termination pay and receive no recall offer for up to two years. This interpretation would preclude the provision of any 'cushion' on account of dislocation and defeat the protective purpose of the statutory termination pay scheme.

77Third, the arbitrator's analysis offends well- established principles of statutory interpretation. Those principles require that, to the extent possible, statutory provisions be interpreted harmoniously so as to avoid absurd results, including those that would defeat the purpose of the statutory scheme in issue. Moreover, an interpretation of a statutory scheme that renders part of a statute pointless, redundant or incapable of application is to be avoided. See Ruth Sullivan, Sullivan and Driedger on the Construction of Statutes, 4th ed. (Markham: Butterworths Canada Ltd., 2002) at pp. 243-57 and Rizzo at para. 27.

78In this case, ss. 56(2)(c) and 67 of the Act form part of an integrated termination pay scheme established under Part XV of the Act. That scheme, viewed as a whole, is designed to protect employees and to establish the obligations of employers when an employee's employment is terminated. Absent clear evidence of a contrary legislative intention, s. 56(2)(c) cannot be construed in a way that displaces the s. 67 election process in its entirety or renders its purpose merely illusory.

79Admittedly, the relationship between ss. 56(2)(c) and 67(1) of the Act is not straightforward or easily discerned. Indeed, the drafting of s. 67(1) leaves much to be desired. It makes no mention of temporary lay-offs, the position of "prescribed employees" in connection with the s. 67 election process, or ss. 55 or 56 of the Act.

80As I have indicated, the triggering event to achieve a temporary lay-off of more than 35 weeks duration pursuant to a s. 56(2)(c) agreement is the timing of the employer's recall offer. A s. 56(2)(c) agreement is effective so long as the employee is recalled "within the time set out in [the] agreement between the employer and the trade union". In McCleary's case, the maximum recall period set by his collective agreement was two years. But when McCleary's lay- off reached the 35-week mark, he had not been recalled by his employer "within the time set out" in the collective agreement so as to trigger the application of s. 56(2)(c). Indeed, he had not been recalled at all. At that point, therefore, s. 56(2)(c) did not apply to McCleary and, thus, his entitlement to termination pay and to an election under s. 67(1) were engaged. [page469]

81I would describe the effect of the interplay among the relevant statutory provisions in this fashion. At the time that McCleary's grievance was filed, which was after his lay-off had reached the 35-week mark, his lay-off was not deemed to be a temporary lay-off under s. 56(2)(c) because he had not yet been recalled. His lay-off thus exceeded the permissible statutory duration of a temporary lay-off and his employment was deemed to be terminated by the combined operation of ss. 56(1)(c) and 56(2)(b) of the Act. He thereby became entitled to termination pay under s. 61 and to an election under s. 67(1) concerning his termination pay and his collective agreement recall rights. Contrary to the arbitrator's findings, therefore, McCleary was not a "prescribed employee" at the relevant time and was not disentitled to termination pay pursuant to s. 55 of the Act.

82In this case, however, McCleary made no formal election under s. 67. Section 67(7) of the Act provides that if a unionized employee fails to make an election, the employer and the trade union are required to attempt to negotiate an arrangement for holding the termination pay in trust. It appears that the parties attempted to negotiate termination pay for McCleary but these negotiations faltered after it became evident that the Employer would be recalling laid off employees to work. Contrary to s. 67(7)(b) of the Act, however, no formal notice of unsuccessful negotiations was delivered and the Employer failed to pay termination pay for McCleary into trust.

83Instead, as I have said, when McCleary was first recalled to work, he indicated an interest in eventually returning to work with the Employer. In so doing, he sought to preserve his recall rights. When he subsequently refused to return to work after the second recall offer, he chose to leave his employment with the Employer in favour of another, presumably more attractive, employment opportunity. Thus, although he did not renounce his recall rights under the formal process set out in s. 67 of the Act, he effectively did so by rejecting the Employer's second recall offer.

84In my view, s. 67(9) of the Act was thereby implicated. It states that if an employee renounces the right to be recalled, the amount held in trust under s. 67(7) is to be paid to the employee and if the employee's right to be recalled had not expired, as in this case, "the employee shall be deemed to have abandoned the right".

(iv) Conclusion

85The arbitrator held that s. 67(1) is not engaged merely because an employee has been laid off for 35 or more weeks. This [page470] is true only in the sense that, to trigger s. 67(1), an employee who has a right to be recalled to work, like McCleary, must also be "entitled to . . . termination pay under [s.] 61" of the Act. That section, in combination with ss. 54-56 of the Act, entitles an employee to termination pay in lieu of notice of termination where the employee is laid off for a period longer than the period of a temporary lay-off. A lay-off of 35 or more weeks is not a temporary lay-off unless, in the case of a unionized employee, a s. 56(2)(c) agreement operates to extend the duration of the lay-off because the employer recalls the employee within the time set out in the agreement. In this case, at the time that McCleary's lay-off reached the 35-week mark, this had not occurred.

86Section 56(2)(c), therefore, was not yet triggered, McCleary was not on a temporary lay-off within the definition of that term under the Act, and his employment was deemed to be terminated under ss. 56(1)(c) and 56(2)(b) of the Act. This, in turn, gave rise to an entitlement to termination pay under s. 61. Finally, as McCleary was entitled to termination pay under s. 61 "because of a lay-off of 35 weeks or more", and also had a right to be recalled for employment under the governing collective agreement, the preconditions to eligibility for his participation in the s. 67 election process were satisfied.

87Accordingly, McCleary should have been afforded the opportunity after he had been laid off for 35 weeks to elect to receive his termination pay and to formally abandon his unexpired contractual recall rights. The fact that the parties did not follow the election process established by s. 67 of the Act cannot deprive McCleary of the termination pay to which he was otherwise entitled.

V. Disposition

88Accordingly, for the reasons given, I would allow the appeal. The Union is entitled to its costs of the appeal on the partial indemnity scale, fixed, as agreed by counsel for the parties, in the total amount of $4,000.

LASKIN J.A. (concurring in the result): --

A. Overview

89I have had the advantage of reading the thorough reasons of Cronk J.A. I agree with her that the arbitrator's award cannot stand. However, as I disagree with some aspects of her analysis, I will give my own reasons for setting aside the arbitrator's award. [page471]

90I agree with Cronk J.A. that the standard of review of the arbitrator's decision is patent unreasonableness. Patent unreasonableness is consistent with this court's judgment in Lakeport Beverages v. Teamsters Local Union 938 (2005), 2005 29339 (ON CA), 77 O.R. (3d) 543, [2005] O.J. No. 3488, 258 D.L.R. (4th) 10 (C.A.). It is also consistent with several recent decisions of this court that have reviewed decisions of arbitrators interpreting a collective agreement and a statute intimately connected to a labour arbitrator's mandate and expertise.

91In my view, the arbitrator's award is patently unreasonable for three reasons: it is contrary to the intention of the parties; it makes the employee's election in s. 67 of the Employment Standards Act, 2000, S.O. 2000, c. 41, meaningless; and it is at odds with the Ministry of Labour's Policy and Interpretation Manual [See Note 2 at the end of the document].

B. Relevant Facts

92Cronk J.A. has set out the facts in detail. Here I will repeat only those that are essential for my decision.

a. The grievor and the collective agreement

93The grievor, Paul McCleary, had been employed as a welder/filler for four years when, in May 2001, he was temporarily laid off because of a shortage of work. The collective agreement then in effect between the union and the employer ran from August 11, 2000 to August 10, 2003. As is typical of collective agreements, this agreement gave laid off employees seniority-based rights, including the right to retain seniority for a period of time after lay-off and the right to be recalled to work. Article 8.03(7), a critical provision on this appeal, stipulated that an employee will lose seniority and will no longer be considered an employee of the company if the employee "is laid off and not recalled to work for a period equal to their seniority, or a maximum of [2] years, whichever is the lesser". As McCleary had four years' seniority, under art. 8.03(7), he retained seniority rights, including the right to be recalled to work, for two years.

94The employer offered to recall McCleary to work on February 7, 2002, and then again on February 13, 2002 -- that is 37 weeks and 38 weeks after he had been temporarily laid off. McCleary refused both offers. By then, he had obtained other employment. The respondent then took the position that McCleary's employment relationship with the company had ended. [page472]

b. The Employment Standards Act ("ESA"): old and new

95When McCleary was laid off in May 2001, the former Employment Standards Act, R.S.O. 1990, c. E.14, was still in effect. The old statute provided that if an employee was temporarily laid off for more than 35 weeks in any 52-week period -- as McCleary was -- the employee was deemed to be terminated and was entitled to termination pay. If the laid off employee also had the right to be recalled to employment -- as McCleary did -- the employee could elect either to be paid the termination pay and abandon the right to be recalled, or to retain the right to be recalled. If the employee elected to retain the right to be recalled, or failed to elect, the employer was required to put the termination pay in trust for later payment to the employee if the employee was not recalled or renounced the right to be recalled, and for payment to the employer if the employee accepted a recall to work.

96In September 2001, during McCleary's period of lay-off, the former ESA was repealed and the new ESA 2000 came into force. In a preliminary ruling, not challenged by either party, the arbitrator concluded that McCleary's grievance should be decided under the new ESA 2000.

97The new ESA 2000 preserved the deemed termination after 35 weeks, and in s. 67, for those employees with recall rights, the election between termination pay and retention of the right to be recalled. However, the new Act added a provision -- s. 56(2)(c) -- that permitted a union and an employer to agree to extend a temporary lay-off beyond 35 weeks and, by doing so, delay a deemed termination.

98Thus, as in the old ESA, s. 56(1) and s. 56(2)(b) of the ESA 2000 together provide that termination occurs when an employer lays an employee off for a period longer than the period of a temporary lay-off, that is longer than 35 weeks in any period of 52 consecutive weeks. However, s. 56(2)(c) provides that an employee may still be on temporary lay-off beyond 35 weeks "where the employer recalls the employee within the time set out in an agreement between the employer and the trade union".

99The relevant provisions of the new ESA 2000 are as follows:

56(1) An employer terminates the employment of an employee for purposes of section 54 if,

(c) the employer lays the employee off for a period longer than the period of a temporary lay-off. [page473]

(2) For the purposes of clause (1)(c), a temporary lay-off is,

(b) a lay-off of more than 13 weeks in any period of 20 consecutive weeks, if the lay-off is less than 35 weeks in any period of 52 consecutive weeks and,

(c) in the case of an employee represented by a trade union, a lay-off longer than a lay-off described in clause (b) where the employer recalls the employee within the time set out in an agreement between the employer and the trade union.

c. The grievance

100McCleary was temporarily laid off for more than 35 consecutive weeks. However, the respondent did not pay him termination pay or invite him to elect between termination pay and the retention of his right to be recalled. The union then filed a grievance on McCleary's behalf.

101The respondent contended that art. 8.03(7) of the collective agreement was an agreement under s. 56(2)(c), extending McCleary's period of temporary lay-off beyond 35 weeks. According to the respondent, when it offered to recall McCleary to work in February 2002, he was still on temporary lay-off. By refusing the offer, McCleary became a "prescribed employee" and thus lost his entitlement to termination pay. The arbitrator accepted this contention. The Divisional Court concluded that the arbitrator's analysis was reasonable, and therefore dismissed the union's application for judicial review.

C. The Standard of Review

102In Lakeport, we rejected the premise that the two recent Supreme Court of Canada decisions out of Alberta -- Voice Construction Ltd. v. Construction & General Workers' Union, Local 92, 2004 SCC 23, [2004] 1 S.C.R. 609, [2004] S.C.J. No. 2 and Alberta Union of Provincial Employees v. Lethbridge Community College, 2004 SCC 28, [2004] 1 S.C.R. 727, [2004] S.C.J. No. 24 -- had changed the well-established standard of review of decisions of Ontario labour arbitrators interpreting the provisions of a collective agreement. That standard remains, as it has for a quarter of a century, patent unreasonableness. In Lakeport, we analyzed the appropriate standard under the four contextual factors mandated by the Supreme Court of Canada. I will not repeat that analysis here.

103The arbitrator's task in Lakeport differed from the arbitrator's task in the present case. In Lakeport, the arbitrator was called on solely to interpret and apply various provisions of the collective agreement. In the present case, the arbitrator was called on to interpret and apply not just the relevant provisions of the collective agreement, but also the provisions of the ESA 2000. [page474] Because the arbitrator also had to consider an external statute, does the standard of review become less deferential? In my view it does not. The standard of review is still patent unreasonableness. That standard is consistent with other recent decisions of this court, and is not contrary to this court's decision in Elementary Teachers Federation of Ontario v. Toronto District School Board, 2005 36712 (ON CA), [2005] O.J. No. 4368 (C.A.).

104When we decided Lakeport, Elementary Teachers had not been argued in this court. In Elementary Teachers, as in this case, the arbitrator had to interpret and apply both the collective agreement and the ESA. The Divisional Court held that the appropriate standard of review was reasonableness. In so holding, the Divisional Court determined that the two Alberta cases had signaled a less deferential standard of review of Ontario labour arbitration decisions. In Lakeport, as I have said, we rejected that determination.

105Then this court released its judgment in Elementary Teachers. In a brief endorsement, the court held that the arbitration board's decision was reasonable. This court did not need to resolve, and did not resolve, the applicable standard of review. That is evident from para. 13 of the panel's reasons:

Further, given that we are satisfied that the decision of the board of arbitration was reasonable, we find it unnecessary to consider whether a distinction between the standards of patent unreasonableness and reasonableness is appropriate on the facts of this case. We do, however, note that the Divisional Court's conclusion that Voice Construction Ltd. v. Construction General Workers Union, Local 92, 2004 SCC 23, [2004] 1 S.C.R. 609, "seems to signal a reduction in the amount of deference to be accorded arbitration boards" has been rejected by this court in relation to a grievance arbitration conducted by an arbitrator appointed under a collective agreement governed by the Labour Relations Act: see Teamsters Local Union 938 v. Lakeport Beverages, a Division of Lakeport Brewing Corp., 2005 29339 (ON CA), [2005] O.J. No. 3488.

106Thus, to resolve the applicable standard of review in this case, we must assess whether the Supreme Court of Canada's "pragmatic and functional" approach warrants a less deferential standard where an arbitrator must interpret and apply both the collective agreement and an external statute. The ordinary rule is that an arbitrator's expertise does not extend to external legislation, thus suggesting less deference to the arbitrator's decision. But in Toronto Board of Education (City) v. Ontario Secondary School Teachers' Federation District 15, 1997 378 (SCC), [1997] 1 S.C.R. 487, [1997] S.C.J. No. 27, at para. 39, Cory J. posited an exception to the ordinary rule:

An exception to this rule may occur where the external statute is intimately connected with the mandate of the tribunal and is encountered frequently as a result. [page475]

107Our court has relied consistently on this exception to maintain a highly deferential standard of review where the external statute the arbitrator must interpret is closely connected to the arbitrator's labour relations mandate and expertise. So, for example, in Ontario English Catholic Teachers' Assn. v. Lanark, Leeds and Grenville County Roman Catholic Separate School Board, 1998 1644 (ON CA), [1998] O.J. No. 3366, 164 D.L.R. (4th) 429 (C.A.), an arbitrator was required to interpret both the collective agreement and the Social Contract Act, 1993, S.O. 1993, c. 5, to determine whether a teacher was disentitled to credit for previous teaching experience because of wage freezes under the statute. Osborne J.A., at para. 32, held that "the same deference is owed to the arbitrator in this matter as would be owed to an arbitrator hearing a grievance arbitration under the collective agreement. Unless the decision of the arbitrator is patently unreasonable, it should stand."

108More recently, in Toronto Catholic District School Board v. Ontario English Catholic Teachers' Assn. (Toronto Elementary Unit) (2001), 2001 8597 (ON CA), 55 O.R. (3d) 737, [2001] O.J. No. 3748 (C.A.), MacPherson J.A. similarly concluded that patent unreasonableness was the appropriate standard of review of the decision of an arbitrator interpreting a collective agreement and a regulation under Ontario's Education Act. In his view, at para. 28, "the arbitrator's interpretation of Regulation 298 made under the Education Act involved an 'external statute . . . intimately connected with the mandate of the tribunal and . . . encountered frequently as a result'."

109The same may be said of employment standards legislation. The ESA 2000 may be a new Act, but the interpretation of employment standards legislation has always been intimately connected to a labour arbitrator's mandate, and labour arbitrators encounter this legislation often in resolving grievances under a collective agreement. Indeed, although the arbitrator was required to interpret the ESA 2000 as well as the collective agreement, what was ultimately at stake was whether the grievor was entitled to termination pay -- a pure labour relations or employment matter. Moreover, s. 99 of the ESA 2000 makes the Act a part of the collective agreement so that any contravention of the statute is enforceable against the employer. This incorporation under s. 99 serves to strengthen the case for deference. Thus, in my view, the pragmatic and functional approach calls for the arbitrator's decision to be reviewed against a standard of patent unreasonableness.

D. The Arbitrator's Decision was Patently Unreasonable

110As I said at the beginning of these reasons, I consider the arbitrator's decision to dismiss the McCleary grievance to be [page476] patently unreasonable for three reasons: it is contrary to the parties' intention; it renders the employees' election in s. 67 of the Act meaningless; and it flies in the face of the Ministry of Labour's sensible Manual.

a. The intention of the parties

111The arbitrator held that art. 8.03(7) of the collective agreement -- the seniority rights clause -- was an agreement under s. 56(2)(c) of the ESA 2000. On this point my colleague agrees with the arbitrator. Respectfully, I disagree. In my opinion, the arbitrator's holding was patently unreasonable.

112In interpreting the terms of a collective agreement, the arbitrator's fundamental task is to ascertain the intention of the parties. The arbitrator did not expressly address the parties' intention in including art. 8.03(7) in the collective agreement. However, to reach the result that he did, the arbitrator must have concluded that the parties intended art. 8.03(7) to be an agreement for the purpose of s. 56(2)(c) of the ESA 2000.

113In my view, that conclusion contains a basic flaw: the collective agreement was negotiated and came into effect over a year before the new ESA 2000 took effect. The former ESA contained no provision entitling a trade union and an employer to extend a temporary lay-off beyond 35 weeks. It therefore seems to me utterly unreasonable to conclude that the parties intended a standard seniority rights clause (art. 8.03(7)), typical of virtually every collective agreement, to be an agreement for the purpose of s. 56(2)(c) of the new statute. The new ESA 2000 was not in force when the parties negotiated art. 8.03(7).

114Section 56(2)(c) permits the parties to agree to extend a period of temporary lay-off, and by doing so, to deprive unionized employees of a right that they would otherwise have: the right to termination pay at 35 weeks. It seems to me that to establish an agreement under s. 56(2)(c) that would oust or at least defer a well-established right, the language the parties use must show that they directed their minds to this ouster or deferral. I cannot conceive that in agreeing to a standard seniority rights clause, the union thought it was bargaining away its members' right to termination pay after a 35-week temporary lay-off.

115I find support for my analysis in the decision of Arbitrator MacDowell in I.P.C. v. Norampac Inc., 2002 Carswell Ont. 5402, L.V.I. 3380-11 (Ont. Arb. Bd.), at paras. 50-51. In dealing with different provisions of the ESA -- provisions that permit an employer and a union to agree to oust the statutory limits on hours of work -- Mr. MacDowell emphasized -- as I have tried to [page477] emphasize -- that if the parties intend to oust an established right under the statute, they must do so in specific terms:

I do not think that the waiver of minimum statutory rights should turn upon guesswork or implication. If the parties intend to oust a provision of the Employment Standards Act -- which they are clearly entitled to do in some circumstances -- then the agreement must do so specifically. That was the law under the "old" Employment Standards Act, and there is no reason to believe that this has changed. (See: McLeod v. Egan (1974), 1974 12 (SCC), 46 D.L.R. (3d) 150 (S.C.C.); Walker Exhausts v. U.S.W.A., Local 2894 (1981), 1981 1837 (ON SC), 32 O.R. (2d) 507 (Ont. Div. Ct.); DDM Plastics Inc. v. I.A.M.A.W., Local 2792 (2001), 2001 62158 (ON LA), 94 L.A.C. (4th) 215 (Ont. Arb. Bd.); Ontario Hydro v. Power Workers Union (1998), 1998 30169 (ON LA), 74 L.A.C. (4th) 425 (Ont. Arb. Bd.)). Ideally, the document should identify the parties, should be dated and signed, should indicate when the agreement comes into effect and when it ends, identify the default employment standard that the parties are agreeing to replace with another entitlement or protection, and what that other entitlement or protection is.

In the instant case there is no such written agreement put before me; nor could the collective agreement, by itself, constitute such agreement, since it was negotiated prior to the new statute coming into effect. There is, in any event, nothing with the clarity and specificity that I think is required to oust the statutory minimum standards under section 17 and 18 of the ESA. And without such "agreement" the kind of scheduling proposed in the example of Mr. Brown, cannot be done.

I agree with this reasoning and rely on it.

b. The employees' election under section 67

116The problem with the arbitrator's holding on art. 8.03(7) of the collective agreement becomes abundantly apparent when one considers the employee's election under s. 67 of the ESA 2000. Section 67 recognizes that an employee may have a statutory right to termination pay while still retaining employment and recall rights under the collective agreement.

117Under the scheme in s. 67, where a collective agreement contains recall rights, the employee who qualifies for termination pay is given the right to elect between termination pay and retention of the right of recall. Section 67(1), (3), (7), (8) and (9) provide:

ELECTION RE: RECALL RIGHTS

Where election may be made

67(1) This section applies if an employee who has a right to be recalled for employment under his or her employment contract is entitled to,

(a) termination pay under s. 61 because of a lay-off of 35 weeks or more; or

(b) severance pay.

. . . . . [page478]

Nature of election

(3) The employee may elect to be paid the termination pay or severance pay forthwith or to retain the right to be recalled.

Employee represented by trade union

(7) If an employee who is represented by a trade union elects to retain the right to be recalled or fails to make an election,

(a) the employer and the trade union shall attempt to negotiate an arrangement for holding the money in trust, and, if the negotiations are successful, the money shall be held in trust in accordance with the arrangement agreed upon; and

(b) if the trade union advises the Director and the employer in writing that efforts to negotiate such an arrangement have been unsuccessful, the employer shall pay the termination pay and severance pay to which the employee is entitled to the Director in trust.

Where employee accepts recall

(8) If the employee accepts employment made available under the right of recall, the amount held in trust shall be paid out of trust to the employer and the employee shall be deemed to have abandoned the right to termination pay and severance pay paid into trust.

Recall rights expired or renounced

(9) If the employee renounces the right to be recalled or the right expires, the amount held in trust shall be paid to the employee and, if the right to be recalled had not expired, the employee shall be deemed to have abandoned the right.

As my colleague Cronk J.A. has explained, severance pay is not an issue on this appeal. We are concerned only with McCleary's entitlement to termination pay.

118The arbitrator decided that McCleary did not have the right to elect termination pay after his lay-off of 35 weeks. According to the arbitrator, McCleary remained on temporary lay-off because of art. 8.03(7) of the collective agreement. Then, when McCleary rejected the employer's offers of recall, he became a "prescribed employee", and thus was disentitled to termination pay (s. 55 of ESA 2000).

119In my opinion, the arbitrator's decision renders the election in s. 67 meaningless, and, moreover, undermines the purpose of the election. On the arbitrator's reasoning, if an employee has a right of recall under the collective agreement, as McCleary did under the seniority rights clause in art. 8.03(7), that right of recall alone is enough to extend the period of temporary lay-off beyond 35 weeks and deprive an employee of the entitlement to termination pay at 35 weeks. In other words, on the arbitrator's [page479] analysis, a typical seniority rights clause, which preserves seniority-based recall rights, would always deprive the employee of the right to elect termination pay after being on temporary lay-off for 35 weeks. That analysis, respectfully, is entirely at odds with the language of the section, which expressly preserves the right to termination pay after 35 weeks even if the collective agreement provides for recall rights.

120Also, the arbitrator's reasoning undermines the basic purpose of s. 67: "to 'cushion' the employees against the adverse effects of economic dislocation". See Rizzo and Rizzo Shoes Ltd. (Re), supra, at para. 25. Under the arbitrator's reasoning, an employee in McCleary's position might have to wait up to two years after lay-off to be entitled to termination pay.

121Thus, I conclude that the arbitrator's reasoning and the dismissal of McCleary's grievance are patently unreasonable, because they defeat the purpose of the election in s. 67 and render that election meaningless. Put differently, the arbitrator's decision is patently unreasonable because at its core, it fails to recognize that termination under the ESA and termination under the collective agreement are quite distinct. An employee may be entitled to statutory termination pay at 35 weeks while still enjoying rights, including recall rights, under the collective agreement. Section 67 legislates their co-existence. The arbitrator's decision obliterates it.

c. The Ministry of Labour's policy and interpretation manual

122The Ministry has issued a Manual that explains s. 56(2) (c) of the Act. The Manual recognizes that the statute does not contain explicit requirements for a "s. 56(2)(c) agreement", but nonetheless sensibly suggests that there must be some evidence the agreement contemplated avoiding a termination that would otherwise be deemed to have occurred. Thus, the Manual makes the point that I have tried to make in these reasons: an ordinary seniority rights clause, such as art. 8.03(7), would not qualify as a s. 56(2)(c) agreement. The relevant portion of the Manual states:

Section 56(2)(c) provides that a temporary lay-off can last for a period of more than 35 weeks in any 52-week period if the employee is represented by a union and the employer recalls the employee within the time set out in an agreement between the employer and employee. The agreement must be in writing in accordance with s. 1(3) of the Act. It may form part of the collective agreement or stand alone as a separate agreement . . .

Although there is no explicit requirement within s. 56(2)(c) that such an agreement specifically state that it is a "s. 56(2)(c) agreement", there has to be some evidence that the agreement was made in contemplation of avoiding a termination that would otherwise be deemed to have occurred under the [page480] Act. In addition, such an agreement must provide that the employee will be recalled on a particular date or within a certain time. Accordingly, a collective agreement provision that merely specifies that employees lose seniority and recall rights after a certain period on lay-off would not be considered an agreement under s. 56(2)(c).

There is no requirement that the Director of Employment Standards approve the agreement. There is also no requirement that any of the conditions set out in subclauses 56(2)(b)(i) to (iv) be met.

123The Ministry's Manual on s. 56(2)(c) obviously takes a view diametrically opposed to the arbitrator's view. Of course, the Manual is not binding on this court. It was prepared for the public and especially for employment standards officers who must apply the Act daily. However, though not binding, courts are entitled to take account of administrative guidelines in interpreting a statutory scheme. This point is recognized in Sullivan and Driedger on the Construction of Statutes at p. 505:

It is well established that administrative interpretation may be relied on by courts to assist in determining the meaning or effect of legislation. However, the opinion of administrative interpreters is not binding on the courts.

124Indeed, in R. v. Nowegijick, 1983 18 (SCC), [1983] 1 S.C.R. 29, 144 D.L.R. (3d) 193, at p. 37 S.C.R., Dickson J. wrote that "[a]dministrative policy and interpretation are not determinative but are entitled to weight and can be an 'important factor' in case of doubt about the meaning of legislation". So here, it seems to me, the Ministry's Manual lends further support to the conclusion that the arbitrator's decision is patently unreasonable.

E. Conclusion

125Like Cronk J.A., I would allow the appeal. I would set aside the judgment of the Divisional Court, and grant the union's application for judicial review. Consistent with these reasons, I would quash the arbitrator's award and order that the respondent pay the grievor the termination pay claimed in the grievance. The appellant is entitled to its costs of the appeal in the agreed amount of $4,000, inclusive of disbursements and GST. The appellant is also entitled to its costs of the application for judicial review in the Divisional Court, which I would fix at the amount ordered by that court, $3,000.

Appeal allowed.

Notes

Note 1: The Union argued before the arbitrator that McCleary's entitlement to termination pay and an election were governed by the ESA, which was in force in May 2001. In a preliminary ruling, the arbitrator determined that the Act, which came into force after McCleary's temporary lay-off commenced but before the 35-week mark, applied to McCleary's grievance. That holding is not challenged on this appeal.

Note 2: Ontario's Employment Standards Branch, Employment Standards Act 2000: Policy and Interpretation Manual (Scarborough: Carswell, 2001) ("Manual").