COURT FILE NO.: 272/05

DATE: 20060223

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

MéTIVIER r.S.J., GRAVELY AND sWINTON JJ.

B E T W E E N:

PORT WELLER DRY DOCKS

Applicant

• and -

THE INTERNATIONAL BROTHERHOOD OF BOILERMAKERS, IRON SHIPBUILDERS, BLACKSMITHS, FORGERS AND HELPERS, LOCAL LODGE 680

Respondent

David W. Brady, for the Applicant

Douglas J. Wray, for the Respondent

HEARD at Toronto: January 18, 2006

SWINTON J.:

1The applicant, Port Weller Dry Docks, has brought an application for judicial review of an arbitration award of David C. Murray dated April 5, 2005. The issue in this case is whether the arbitrator gave a patently unreasonable interpretation to a Last Chance Agreement when he determined that the employer had failed to "immediately discharge" the grievor after discovering misconduct.

Background Facts

2The grievor was a long term employee of the applicant who had been discharged in 2003 for dishonesty. In order to resolve the grievance that he filed at that time, a Last Chance Agreement was signed by him, the company and the respondent union dated March 15, 2004. It was to be in force for two years. In it, the grievor and the union agreed that the company had just cause to discharge the grievor. As well, the grievor acknowledged that he had engaged in serious misconduct, and he undertook, on reinstatement, not to engage in any conduct that might result in discipline. The company then agreed to reinstate him without back pay or loss of seniority. The following paragraphs of the agreement are of particular importance in this application:

4. It is understood and agreed that if the Grievor breaks the undertaking he has made in paragraph 2 above and engages in misconduct, he will be immediately discharged for cause by the Company.

5. The Union and the Grievor agree that if the Grievor is discharged as provided for in paragraph 4 above, a grievance may be filed putting the misconduct into dispute.

6. If the grievance proceeds to arbitration and if the Grievor is found to have engaged in misconduct, the Union and the Grievor agree that just cause will have been proven and no submission will be made to the arbitrator or board of arbitration respecting the substitution of a lesser penalty.

3By a letter dated September 4, 2004, the grievor was again discharged for misconduct. The termination letter alleged misconduct on each of three consecutive working days: Friday, August 27; Monday, August 30; and Tuesday, August 31, 2004.

4At the arbitration hearing in this matter, counsel for the company stated that he would be adducing evidence based only on the events of Friday, August 27, as any misconduct warranted discharge. A five day hearing ensued.

The Arbitration Award

5As set out in the arbitration award, the grievor's conduct on Friday morning was the subject of an inquiry by Robert Houston, his department manager. Houston met with the grievor in the presence of union representatives to ask why he had not been working at his assigned tasks. Houston then made further inquiries to check the grievor's story.

6The arbitrator stated that Houston "quite correctly" believed that disciplinary action against the grievor was warranted. Houston stated this in a memo directed to the company's Human Resources Manager Ross Serianni, in which he asked to discuss this matter on Monday. The arbitrator found that Houston "did not act upon his own conclusion and dismiss [the grievor] immediately as contemplated by the Last Chance Agreement." There was no finding of fact that Houston actually had the authority to discharge an employee.

7Houston spoke to Serianni around noon on Friday, and that afternoon Serianni carried out an investigation. He spoke to the union business manager and told him that there would be an investigation. He also said"You should talk to [the grievor] before he gets into trouble".

8On Tuesday afternoon, Serianni and Houston met with the grievor, the business agent and other union representatives. They discussed Friday's events and alleged time-wasting again on Monday the 30th. On Wednesday, the grievor was suspended without pay while the company sought legal advice. On Friday, after legal advice had been obtained, the union was verbally advised by Serianni that the grievor was going to be terminated. On the following Tuesday (the first work day following Labour Day), the grievor's discharge was formalized in writing.

9While the discharge letter stated that the grievor was wasting time at work, the arbitrator found that the grievor committed three offences on August 27: breach of trust, insubordination, and being away from his work site without permission. He accepted the employer's submission that any of these was sufficient for the employer to trigger immediate termination in accordance with the Last Chance Agreement. He also noted that the union had acknowledged that there was "borderline misconduct".

10However, he then went on to interpret paragraph 4 of the agreement, quoted above. He concluded that the grievor had to be terminated promptly once fault was found. The failure to do so here rendered the discharge void ab initio - a result he described as "absurd" (p. 10 of the award). He then went on at p. 11 of his award,

The interplay of clauses 2 and 4 of the Last Chance Agreement compelled the employer to act promptly when the misconduct came to light. They had enough information to discharge [the grievor] on the Friday afternoon (Monday morning at the latest). Instead of discharging him then they delayed until later in the week (actually the following week in a formal written fashion). Not only that, they said they were discharging him for his misconduct on the Friday PLUS his alleged misconduct on the Monday AND Tuesday. At arbitration they then reduced the grounds to only the misconduct of the Friday. Unquestionably, I like Arbitrator Freedman in the Jessome case would have been obliged to uphold the discharge had the employer either:

A. Discharged on the Friday (maybe Monday morning), or

B. Adduced as compelling evidence about the alleged misconduct on the Monday and Tuesday as was adduced respecting the Friday misconduct.

Simply stated: It is just not reasonable for the employer, by its conduct, to set the bar at three days worth of misconduct and then at arbitration say one days worth of misconduct is sufficient for the Arbitrator to uphold the discharge.

11He then allowed the grievance and ordered that the grievor be reinstated, with compensation to be determined.

The Standard of Review

12Given the decision of the Court of Appeal in Lakeport Beverages v. Teamsters Local Union 938, 2005 29339, the standard of review to apply to an arbitrator's interpretation and application of a collective agreement is patent unreasonableness (at para. 31).

13The company argued that the arbitrator exceeded his jurisdiction when he dealt with other matters after he found that the grievor had engaged in misconduct. Such an error of jurisdiction was said to be reviewable on the standard of correctness.

14In my view, the arbitrator's task was to interpret the Last Chance Agreement, an agreement of the company, the union and the grievor. This is a task where arbitrators have expertise. Therefore, the standard to be applied is the patently unreasonable standard.

15According to that standard, an award should be upheld unless it is "clearly irrational, that is to say evidently not in accordance with reason" (Canada (Attorney-General) v. Public Service Alliance of Canada (1993), 1993 125 (SCC), 101 D.L.R. (4th) 673 (S.C.C.) at 690).

Analysis

16The issue to be determined is whether the arbitrator's interpretation of the words "immediately discharged" was patently unreasonable. While this standard is very high, in my view, the interpretation of the agreement leading to the decision to uphold the grievance was patently unreasonable.

17The arbitrator relied on the case of Re Delta Chelsea Hotel and Hotel Employees Restaurant Employees Union, Local 75 (2002), 111 L.A.C. (4th) 22 (Surdykowski). That case dealt in detail with the arbitral jurisprudence on the consequences of an employer's failure to comply with procedural requirements before disciplining an employee. In that case, the arbitrator was dealing with collective agreement language that required the employer to issue discipline notices to employees containing information and reasons for which the notice is issued. Such notices "shall be issued as soon as the Employer is aware of the event leading to her actions and has a reasonable period of time to investigate the matter". In that case, the grievor was discharged for theft and fraud that allegedly occurred nearly three months before termination.

18At pp. 31-32, the arbitrator discussed a labour relations principle that has developed which requires employers to take disciplinary action in a timely way – "that is, within a reasonable time of becoming aware of the facts material to the alleged misconduct". He then went on to say that the arbitrator's task is to determine whether the collective agreement provision at issue confers a procedural or a substantive right. Where the provision creates a procedural right, arbitrators consider the grounds for the failure to comply and the degree of prejudice that resulted when they determine the consequences of non-compliance. In contrast, where the right is substantive, prejudice is presumed, and as a consequence of non-compliance with the provision, the discipline is void.

19There, the arbitrator held that the clause in issue was a codification of the principle that the employer must take disciplinary action in a timely way, and it conferred a substantive right on the employee. He also held that the time period for notice began when the employer became or could reasonably have become aware of the material facts. He concluded that the three month delay in investigating and informing the grievor was unreasonable.

20The views expressed by Arbitrator Surdykowski are consistent with those expressed in Brown and Beatty, Canadian Labour Arbitration (3rd ed.) (Aurora: Canada Law Book Inc., 2005) at p.7-17:

Whenever an employer fails to exercise its disciplinary powers according to required procedures, the arbitrator must decide what the effect of the breach will be. If the defect relates to a provision in the agreement that is regarded as critical to the integrity of the process, many arbitrators are inclined to assume that the employee has been irreparably harmed and will treat whatever discipline was imposed as void "ab initio" (from the beginning). Most arbitrators have looked at clauses guaranteeing union representation in this way.

The authors go on to say that "[t]he right to discipline has also been lost for inordinate and unjustified delay". They also stated (at p. 7-17),

Not all procedural irregularities, however, will result in the exoneration of the employee. If, for example, the defect pertains to a provision that is regarded as permissive and purely procedural, some other remedy is likely to be found.

Finally, they note that arbitrators look to see whether there has been real prejudice before they nullify disciplinary sanctions because of procedural irregularities (at p. 7-18).

21In contrast to the analysis in Delta Chelsea Hotel, the arbitrator here made no effort to assess whether paragraph 4 of the Last Chance Agreement conferred a substantive or procedural right on the grievor and in doing so came to a patently unreasonable conclusion. In effect, he concluded that it conferred a substantive right to be immediately discharged if the grievor engaged in further misconduct. However, the language of that paragraph is framed to state a consequence for any misconduct by the employee – that is, immediate discharge. The language does not obviously confer a benefit or procedural protection on the employee, as in clauses which require notice or union representation. Nor does the language create a duty on the employer to act in a certain way, so as to confer a substantive right on the grievor to action within a particular period of time.

22In contrast to paragraph 4 is article 8.2 of the collective agreement, which the arbitrator considered earlier in his award. That article requires discussion of disciplinary action with the union prior to notification of the employee. It explicitly states that if the procedures are not followed"the disciplinary action will be rescinded". The arbitrator made no reference to this difference in the language of the two provisions, yet the contrast in the language of the two provisions is further indication that the interpretation of the Last Chance Agreement was unreasonable.

23Moreover, the arbitrator interpreted the word "immediately" without importing any concept of reasonableness, even though the arbitrator in Delta Chelsea Hotel noted that provisions requiring timely notice impose an obligation on the employer to take disciplinary action "within a reasonable period of time of becoming aware of the facts material to the alleged misconduct". The purpose is to be fair to both parties, ensuring that the employee has timely notice of alleged misconduct so that he can respond while memories are fresh, yet the employer has a reasonable period to investigate the misconduct. In contrast, the arbitrator here has interpreted the clause as giving a substantive right to the grievor to be discharged at once, without according the employer a reasonable time to investigate, discuss the issues with the union, or take legal advice.

24Again, it is noteworthy that in interpreting article 8.3 of the collective agreement, which requires notice to the union of a suspension within a set period of time, the arbitrator said that the clause "does not oblige the employer to rush to judgment and make its final decision within 24 hours of the suspension being imposed" (at p.7). He went on to state that such an interpretation would impose an obligation to carry out an "inadequate and hasty investigation lacking complete facts and sober analysis" – a result that no union would seek. In contrast, his interpretation of the Last Chance Agreement appears to require the employer to act without taking time for investigation, reflection or legal advice.

25For these reasons, the interpretation of the term "immediately discharged" is patently unreasonable in light of the arbitral jurisprudence and the language of the Last Chance Agreement and the collective agreement.

26Moreover, the arbitrator's findings of fact that the company did not discharge the grievor "immediately" are not supportable by the evidence. In this case, the Human Resources Manager did investigate and speak to the union on the Friday. He did not take immediate action, continuing with a further investigation of another incident and further discussion with the union and the grievor on the following Tuesday. He then obtained legal advice before deciding to discharge – a decision communicated to the union on the Friday, one week after the first misconduct. The company's investigation could only be complete when it was satisfied, on the facts and with the legal advice obtained, that it could prove grounds for discharge.

27The arbitrator's interpretation leads to an absurd result, as he himself observed. An arbitrator might well interpret the language of the agreement as requiring the employer to act within a reasonable period of time, in accordance with the general principles discussed in Delta Chelsea Hotel, but the Last Chance Agreement does not confer a substantive right on the grievor to be discharged immediately as the arbitrator found – either the day the misconduct was discovered or the day after. Even if there is procedural protection in the words of the agreement, the arbitrator failed to apply the arbitral jurisprudence and ask whether there was prejudice to the grievor from the employer's failure to act more quickly. Had he done so he would have had to conclude that there has been no prejudice to the grievor because of the time taken by the company to come to a decision and inform him of it.

28For these reasons, the application for judicial review is granted, and the decision of the arbitrator is quashed. As he found that the grievor had engaged in misconduct, the company had just cause for discharge in accordance with the Last Chance Agreement, and therefore, the grievance is denied. Costs to the applicant are fixed at $4,000.00 inclusive of GST and disbursements.

Swinton J.

Métivier R.S.J.

Gravely J.

Released: February 23, 2006

COURT FILE NO. 272/05

DATE: 20060223

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

MéTIVIER r.S.J., GRAVELY AND sWINTON JJ.