COURT FILE NO.: 576/06

DATE: 20070517

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

FERRIER, HOWDEN & HIMEL JJ.

B E T W E E N:

CANADIAN GENERAL-TOWER LIMITED

Applicant

- and -

UNITED STEEL, PAPER and FORESTRY, RUBBER, MANUFACTURING, ENERGY, ALLIED INDUSTRIAL AND SERVICE WORKERS INTERNATIONAL UNION (UNITED STEEL WORKERS) LOCAL 862 AND FRANK REILLY

Respondents

George Avraam and Mark Mendl, for the Applicant

Terence J. Billo, for the Respondent (USWA, Local 862)

HEARD: February 16, 2007

HIMEL, J.

REASONS FOR DECISION

[1] Canadian General-Tower Limited applies for judicial review of the arbitrator’s decision that twenty-three employees were eligible to receive benefits under the terms of a Supplemental Unemployment Benefit Plan (the “SUB Plan”). He had concluded that, for the purpose of determining eligibility for such benefits which are intended for eligible employees on “temporary lay-off” from employment, a “temporary lay-off” is the equivalent of the period of time that bargaining unit employees retain recall rights under the terms of a collective agreement between the employer and the union. The issue before us is whether the arbitrator’s award ought to be quashed and a different interpretation substituted for the decision.

FACTUAL BACKGROUND:

[2] Canadian General-Tower Ltd. is a unionized business which produces vinyl materials used in a number of industries. Based in Cambridge, Ontario, the company employed 468 bargaining unit employees at the time of the dispute. As a result of a downturn in business, the employer eliminated a shift of operation and gave twenty-three employees lay-off notices on October 8, 2004. In the notices, employees were advised that the lay-off date was October 29, 2004 and that they maintained recall rights (in the case of the affected employees, they had recall rights of either one or two years under the terms of the collective agreement). On October 18, 2004, the employees received a memorandum offering career transition counselling. On November 2, 2004, the employer issued the employees their Records of Employment. On October 28, 2004, the union and employer met to discuss whether the employees would receive benefits under the Supplementary Benefits Plan (SUB). The employer decided that no benefits would be paid because the employees were not on “temporary lay-off” but, rather, were on permanent lay-off because none of the employees were expected to be recalled within the recall periods.

[3] The union filed a grievance on November 19, 2004 taking the position that the affected employees were on temporary lay-off because they had recall rights under the collective agreement. In September and October 2005 (45 to 49 weeks after the lay-off date), the employer recalled the employees and twenty-two of twenty-three employees returned to work. The employer says that the recalls were unexpected at the time of the initial lay-offs and occurred because of unforeseen events including medical leaves of absence, long-term disability leaves and voluntary and involuntary termination of employment of certain employees. The fifth shift eliminated by the employer was never reinstated.

[4] Arbitrator Frank M. Reilly was appointed to consider the grievance filed by the union. The hearing which took place on June 29, 2006 proceeded on an agreed statement of facts, supporting documents and oral argument. On October 2, 2006, the arbitrator released his award.

ISSUES:

[5] The issues to be determined are as follows:

(1) What is the appropriate standard of review to be applied to the arbitrator’s decision?

(2) Should this court interfere with the decision and quash the award?

THE STATUTORY FRAMEWORK AND THE SUPPLEMENTAL UNEMPLOYMENT BENEFIT (SUB) PLAN:

[6] The SUB Plan is an agreement entered into between the employer and the union and is incorporated into the collective agreement between the parties. The Plan is governed by the Employment Insurance Act, S.C. 1996, c. 23, s. 7(1) and 7(2) and the Employment Insurance Regulations, S.O.R/96-322, s. 14. The Employment Insurance Act allows persons to receive employment insurance benefits where they have suffered “an interruption of earnings from employment.” Section 14 of the Employment Insurance Regulations provides that an “interruption of earnings from employment” occurs when a person is “laid off or separated from that employment and has a period of seven or more consecutive days during which no work is performed for that employer”. Regular benefits are paid at the rate of 55% of an individual’s average insured earnings up to a maximum of $412 per week. Section 37 of the Employment Insurance Regulations allows employers to have supplemental unemployment benefit plans on condition that the plans are registered and meet the requirements of that section. The purpose of the benefits plan is to allow eligible persons to receive employment insurance benefits and supplemental payments where unemployment is a result of a “temporary stoppage of work”: see section 37(2)(b). Supplemental payments made under a registered plan do not result in any deductions from regular employment insurance benefits. Such benefits may be paid to top up the regular benefits to a maximum of 95% of normal weekly earnings: see section 37(2)(d). However, one of the conditions for receiving supplemental unemployment benefits is that the stoppage of work must be “temporary”. There is no definition of the term “temporary stoppage of work” in the Employment Insurance Act or Regulations and the term “temporary lay-off” is not used at all. Because the maximum period for which regular unemployment benefits may be paid is 52 weeks and it is a condition of receiving SUB payments that the employee apply for and be in receipt of regular benefits, the employee’s receipt of SUB benefits will be limited to the maximum period of entitlement for regular benefits of 52 weeks.

[7] The Sub Plan is contained in a document that is incorporated into the collective agreement between the parties and provides that supplemental benefits are available for an employee who is on a qualifying lay-off. Section 4 of the Plan states, “A layoff for the purposes of this Plan is any temporary layoff….” The Sub Plan does not define “temporary layoff.” While the Employment Insurance Regulations do not define the term “temporary stoppage of work”, in the Guide for the Supplemental Unemployment Benefit (SUB) Program published by Service Canada, the following reference is made:

Temporary stoppage of work

SUB plans are intended for periods of unemployment caused by a temporary stoppage of work. Termination of employment caused by a re-organization or a shutdown of a plant or operation is not considered temporary unemployment. SUB payments may not form part of a separation package, be used to bridge retirement, nor form any part of a work sharing agreement or short-week benefits.

Recall rights do not necessarily constitute a reason for determining a lay-off to be temporary. The employer should be able to estimate the date of the employee’s return to work.

[8] The Guide is stated to be informational and stipulates the following words on its covering page: “Please note: This guide provides general information only. In controversial situations, the Employment Insurance Act/Regulations must govern.”

[9] Under the collective agreement negotiated by the parties, employees are entitled to be given seven calendar days’ notice prior to the lay-off date and seniority determines the right to recall for employment. For example, employees with the company for at least two months and less than one year in duration are entitled to be recalled for a period of one year, and employees with one year and up to two years’ service are entitled to a period of two years for recall.

[10] In the context of statutory appeals under the Employment Insurance Act, the question of whether a lay-off is temporary has been considered in rulings by judges of the Federal Court who sit as Umpires. In the decision of the Umpire in Linda K. Duck, CUB 43036A, it was held that a temporary lay-off is not synonymous with recall rights under a collective agreement.

THE STANDARD OF REVIEW:

[11] The employer submits that the appropriate standard of review is correctness and that the arbitrator’s award concluding that a “temporary lay-off” is the equivalent of a period of time that an individual retains recall rights under the collective agreement is incorrect. The union takes the position that the appropriate standard of review is that of patent unreasonableness and that this court should not interfere with the decision of the arbitrator.

[12] What is the standard of review in this case? To determine the standard of review requires the application of the pragmatic and functional analysis which includes consideration of four contextual factors: the presence or absence of a privative clause; the purpose of the legislation in question and the particular provision; the nature of the question at issue; and the expertise of the tribunal relative to the expertise of the reviewing court on the question at issue: see Pushpananthan v. Canada (Minister of Citizenship and Immigration), [1998] 1 S.C.R. 982 at 1006 to 1012; Dr. Q. v. College of Physicians and Surgeons of British Columbia, 2003 SCC 19, [2003] 1 S.C.R. 226 at 238. In applying the four contextual factors, the object is to determine whether the legislature intended that a reviewing court give deference to a decision made by an administrative tribunal, and, if so, the appropriate level of deference: see Lakeport Beverages v. Teamsters Local Union 938 (2005), 258 D.L.R. (4th) 10 (Ont.C.A.) at 18.

[13] Considering and applying those four contextual factors to the case at bar:

(1) The presence of a privative clause:

[14] Section 48(1) of the Labour Relations Act, 1995, S.O. 1995, c. 1, Sch. A, is a strong privative clause which states that there will be “final and binding settlement by arbitration”. In Toronto (City) Board of Education v. Ontario Secondary School Teachers’ Federation, District 15, [1997] 1 S.C.R. 487, the Supreme Court held that where the decision of a labour relations tribunal is protected by a broad privative clause, a high deferential standard of review should be applied and the decision should be set aside only if it is patently unreasonable. The court wrote at 505:

…the principle of judicial deference is no more than the recognition by courts that legislators have determined that members of an arbitration board with their experience and expert knowledge should be those who resolve labour disputes arising under a collective agreement.

(2) The purpose of the legislation and the particular provision:

[15] The purpose of labour arbitration is to secure prompt, efficient and cost-effective settlement of disputes arising out of an interpretation and application of a collective agreement: see Lakeport Beverages v. Teamsters, Local 938, supra, at 19; Trent University Faculty Association v. Trent University (1997), 35 O.R. (3d) 375 (C.A.) at 385. Section 2 of the Labour Relations Act outlines the purposes of the Act which include the promotion of expeditious resolution of workplace disputes. Section 48(1) of the Act requires that every collective agreement provide for the final and binding settlement by arbitration of all differences between the parties arising from the interpretation and application of the agreement. Under section 48(12)(j), arbitrators are given specific authority to interpret and apply employment-related statutes despite any conflict between those statutes and the terms of a collective agreement. The provincial legislature clearly intended that labour arbitrators be given full authority to apply and interpret employment-related statutes which include the Employment Insurance Act. That a Federal statute forms part of the framework for the issue does not mean that the subject matter is not connected to matters related to the collective agreement.

(3) The nature of the question at issue:

[16] The question at issue is the meaning of “temporary layoff” under the SUB Plan, a document which is incorporated into the collective agreement. Consideration of this issue requires a review of the SUB Plan, the collective agreement, the Employment Insurance Act and the Employment Insurance Regulations. The parties could have defined the meaning of this term without reference to external sources of interpretation but elected not to do so. The question, therefore, is not one with wide ranging implications but is confined to this SUB Plan agreement between the employer and the union. It is a matter of mixed fact and law.

(4) Expertise of the tribunal:

[17] In the decision of Canada (Director of Investigation and Research) v. Southam Inc., [1997] 1 S.C.R. 748 at 773, the court discussed the factor of the area of the tribunal’s expertise and said as follows: “Expertise, which in this case overlaps with the purpose of the statute that the tribunal administers, is the most important of the factors that a court must consider in settling on a standard of review.” Where the issue to be considered falls outside the area of expertise of the tribunal, deference is not justified: see Trent University Faculty Association v. Trent University, supra, at 387. In Toronto (City) Board of Education v. Ontario Secondary School Teachers’ Federation, District 15, supra, at 506, Justice Cory commented that the expertise of arbitrators will extend to interpreting “outside” legislation if it is intimately connected with the mandate of the tribunal and is, therefore, encountered frequently. Further, in National Automobile, Aerospace Transportation and General Workers Union of Canada (CAW-Canada), Local No. 27 v. London Machinery Inc. (2006), 79 O.R. (3d) 444 (C.A.) at 458, the court held that arbitrators possess superior expertise in interpreting statutes as they relate to collective agreements and SUB plan benefits and affirmed the principle of according strong deference to the arbitrator’s award in the context of a matter related to the Employment Standards Act. The court concluded that the governing standard of review in that case was patent unreasonableness.

Conclusion:

[18] Applying the four factors within a pragmatic and functional analysis, I am of the view that interpretation of collective agreements including SUB Plan benefits are matters which go to the heart of the expertise of labour arbitrators and that arbitrators possess a superior expertise in interpreting them. The legislature intended that a reviewing court give deference to a decision made by a labour arbitrator appointed under the Labour Relations Act. Therefore, the appropriate standard of review in this case is patent unreasonableness.

WAS THE ARBITRATOR’S DECISION PATENTLY UNREASONABLE AND SHOULD THIS COURT INTERFERE WITH THE AWARD?

[19] The test of what constitutes a patently unreasonable decision has been held to be a strict one that sets a high standard of review. The court will not intervene unless it is satisfied that the Board’s decision is “clearly irrational” or “evidently not in accordance with reason”: see Attorney General of Canada v. Public Service Alliance of Canada (1993), 1 S.C.R. 941. It is not sufficient that the decision of the Board is wrong in the eyes of the court: “A definition of patently unreasonable is difficult, but it may be said that the result must almost border on the absurd”: see Voice Construction Ltd. v. Construction & General Workers’ Union Local 92 2004 SCC 23, [2004] S.C.J. No. 2; Teamsters Union Local 938 v. Lakeport Beverages, supra.

[20] I note that Arbitrator Reilly erred in his comment that the Employment Insurance “Regulations and Guidelines are not law.” Regulations are law and Guidelines, while for general information and not legally binding, may be reflective of legislative intent and are entitled to be considered as a relevant factor when interpreting legislation. If the mistaken reference in the decision of the arbitrator was to be replaced by the word “Guidelines”, the statement is accurate. Holding that the Guidelines were not law, were worded ambiguously and were not designed to nullify the terms of the collective agreement governing recall rights is not inaccurate. In our view, his error did not produce a patently unreasonable result. The fact that a reviewing court considers a decision to be incorrect or even unreasonable, is not the issue. A patently unreasonable decision is one that is “so flawed that no amount of curial defence can justify letting it stand”: see Canada Post Corporation v. Canada Union of Postal Workers, [2001] O.J. No. 4412 (C.A.); Law Society of New Brunswick v. Ryan 2003 SCC 20, [2003] S.C.J. No. 17.

[21] Arbitrator Reilly made comments regarding the decision of London Machinery Inc., supra, and whether it applied to the circumstances before him. He held that the Court of Appeal was only dealing with the termination pay scheme under the Employment Standards Act and the definition of terms such as “temporary lay-off” and “termination” with reference to that Act and that the case may be distinguished from the case at bar. Furthermore, the arbitrator considered the factual background to the lay-offs, analyzed the evidence before him and concluded that the employees in question were experiencing a “temporary stoppage of work,” or were on “temporary lay-off” under the collective agreement and the SUB Plan. His determination that a “temporary lay-off” must be defined with reference to the recall rights under the collective agreement and the actual experience of the parties is not patently unreasonable. The decision involves the interpretation of a contract negotiated between the parties where the terms are not defined. The Arbitrator acted within his jurisdiction by interpreting the contract in the manner which he did. Accordingly, there is no basis to interfere with the award.

RESULT:

[22] For the reasons outlined above, the arbitrator’s decision which included an interpretation of “temporary lay-off” and rights under the Supplementary Unemployment Benefits Plan was not patently unreasonable and this court will not interfere with the award. The application for judicial review is dismissed with costs fixed at $5,000 payable by the applicant Canadian General-Tower to the respondents.

HIMEL J.

FERRIER J.

HOWDEN J.

Released: May 17, 2007

COURT FILE NO.: 576/06

DATE: 20070517

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

CANADIAN GENERAL-TOWER LIMITED

Applicant

- and -

UNITED STEEL, PAPER and FORESTRY, RUBBER, MANUFACTURING, ENERGY, ALLIED INDUSTRIAL AND SERVICE WORKERS INTERNATIONAL UNION (UNITED STEEL WORKERS) LOCAL 862 AND FRANK REILLY

Respondents

REASONS FOR JUDGMENT

HIMEL J.

Released: May 17, 2007