COURT FILE NO.: 568/08

DATE: 20090316

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

CUNNINGHAM, A.C.J.S.C.J., carnwath AND SWINTON JJ.

B E T W E E N:

NATIONAL AUTOMOBILE, AEROSPACE, TRANSPORTATION AND GENERAL WORKERS UNION OF CANADA (CAW – CANADA) AND ITS LOCAL 222

Applicant

• and -

JOHNSON CONTROLS INC. AND BRIAN MCLEAN

Respondents

Anthony F. Dale, for the Applicant

Robert J. Atkinson, for the Respondent Johnson Controls Inc.

HEARD at Toronto: March 6, 2009

SWINTON J.:

Overview

1The applicant, CAW-Canada and its Local 222 (“the union”), seeks judicial review of an arbitration award dated July 31, 2008. The central issue in this application is the arbitrator’s interpretation of s. 56(2) of the Employment Standards Act, 2000, S.O. 2000, c. 41 (the “ESA”), which determines when and if a termination of employment has occurred for purposes of the Act.

Background Facts

2Local 222 of the CAW is the bargaining agent for a bargaining unit of employees of the respondent Johnson Controls Inc. at a plant in Whitby, Ontario. On September 18, 2007, the respondent gave notice to 293 of its employees of a permanent lay-off effective November 30, 2007. Over 200 employees were in fact laid off on November 30, 2007.

3Section 54 of the ESA requires an employer who terminates the employment of an employee who has been continuously employed for three months or more either to give written notice of termination in accordance with the Act or to make a payment in lieu of notice, in accordance with s. 61.

4To determine what constitutes termination, one turns to s. 56. Clause 56(1)(c) states that the employment of a person is terminated if the employer lays the person off for a period longer than the period of a temporary lay-off. Subsection 56(2) defines a “temporary lay-off”:

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

(a) a lay-off of not more than 13 weeks in any period of 20 consecutive weeks;

(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,

(i) the employee continues to receive substantial payments from the employer,

(ii) the employer continues to make payments for the benefit of the employee under a legitimate retirement or pension plan or a legitimate group or employee insurance plan,

(iii) the employee receives supplementary unemployment benefits,

(iv) the employee is employed elsewhere during the lay-off and would be entitled to receive supplementary unemployment benefits if that were not so,

(v) the employer recalls the employee within the time approved by the Director, or

(vi) in the case of an employee who is not represented by a trade union, the employer recalls the employee within the time set out in an agreement between the employer and the employee; or

(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.

5Article 9.02(f) of the collective agreement provided that an employee’s seniority and employment status would terminate if the employee was laid off and not recalled to work for twelve months or a length of time equal to the employee’s seniority, whichever is greater. Appendix D of the agreement required the respondent to continue to pay premiums for insured health benefits for three full months after the start of a lay-off. The respondent did so for that period and then stopped.

6On November 29, 2007, the union filed a grievance, claiming that the lay-off of affected employees would become a termination of employment for purposes of the ESA after 13 weeks. In doing so, the union relied on s. 56(2)(a), claiming that the lay-off would be more than 13 weeks in a 20 week period. The union claimed that the respondent had given approximately ten weeks of notice to affected employees, but was required by the mass termination provisions in s. 58 of the ESA to give 12 weeks of notice. Therefore, the union argued, the respondent would owe termination pay to affected employees for the balance of the notice period.

7The mass termination provisions apply when an employer terminates 50 or more employees. Section 3(1) of the Termination and Severance of Employment Regulation, O. Reg. 288/01 specifies eight weeks of notice before termination when the number of employees terminated is 50 or more but less than 200. Notice of at least 12 weeks is required if the number of employees terminated is 200 or more but fewer than 500.

8The respondent took the position that s. 56(2)(c) was the operative provision of the ESA.

The Arbitration Award

9The arbitrator interpreted the relevant provisions of the ESA and applied the decision of the Ontario Court of Appeal in CAW-Canada, Local 27 v. London Machinery Inc. (2006), 2006 8711 (ON CA), 264 D.L.R.(4th) 428. He found that the collective agreement was an agreement within the meaning of s. 56(2)(c) of the Act, because it was an agreement between the union and the respondent which provided recall rights to laid off employees.

10Clause 56(2)(b) permits a lay-off up to 35 weeks in a period of 52 consecutive weeks provided certain requirements are met. Clause 56(2)(c) permits a lay-off longer than the period 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. The arbitrator’s finding with respect to an agreement has not been challenged in this application for judicial review.

11The arbitrator also rejected the union’s argument that the employer could only rely on s. 56(2)(c) if the employer had complied with the requirements of s. 56(2)(b). Clause 56(2)(b) permits a lay-off up to 35 weeks in a period of 52 consecutive weeks provided one of the requirements in paragraphs (i) through (vi) are met. For example, s. 56(2)(c)(ii) contains the requirement that the employer continue to make payments for the benefit of employees under a pension plan or a group insurance plan. As the respondent had ceased to pay premiums for benefits after 12 weeks, the union submitted that the respondent could not rely on s. 56(2)(c), and the temporary lay-off could be no longer than 13 weeks.

12The arbitrator applied London Machinery, which described s. 56(2)(c) as a “stand alone” provision (at para. 67). He concluded that he was bound by that case, stating (at pp. 12-13 of the Reasons):

… the employees of Johnson Controls remain on temporary lay-off and have that status until they are laid-off for thirty five weeks out of fifty two. If they are laid-off for thirty five weeks out of fifty two their temporary lay-off will come to an end and their employment will be terminated for the purposes of the ESA.

Therefore, the arbitrator held that the maximum duration of the lay-offs in this case was determined by s. 56(2)(c) and not s. 56(2)(a). Accordingly, the affected employees were not terminated after a lay-off of 13 out of 20 consecutive weeks.

Issues

13There is only one issue in this application: was the arbitrator’s conclusion that s. 56(2)(a) of the ESA did not apply reasonable?

Analysis

14The Court of Appeal in London Machinery applied a patently unreasonable standard of review to the arbitrator’s interpretation of the ESA. Given that the Supreme Court of Canada has collapsed the reasonableness and patent unreasonableness standards into one standard in Dunsmuir v. New Brunswick (2008), 2008 SCC 9, 291 D.L.R. (4th) 577 (at para. 45), the appropriate standard of review of the arbitrator’s decision in this application is reasonableness.

15The reasonableness standard was described by the Supreme Court of Canada in Dunsmuir at para. 47:

A court conducting a review for reasonableness inquires into the qualities that make a decision reasonable, referring both to the process of articulating the reasons and to outcomes. In judicial review, reasonableness is concerned mostly with the existence of justification, transparency and intelligibility within the decision-making process. But it is also concerned with whether the decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law.

16The union argues that the respondent can not rely on s. 56(2)(c), because an employer can only rely on that provision to extend a lay-off beyond 35 weeks if the employer has complied with the requirements of s. 56(2)(b) by doing one of several listed things for the benefit of the affected employee.

17In my view, the arbitrator’s decision was reasonable, given the wording of s. 56(2) of the ESA and the Court of Appeal’s decision in London Machinery.

18While the union argues that compliance with s. 56(2)(b) is required before an employer can rely on s. 56(2)(c), that is not evident from the language used. While s. 56(2)(c) does refer to s. 56(2)(b), it does so in the context of permitting a longer period of temporary lay-off than the 35 weeks in 52 weeks permitted under s. 56(2)(b).

19It is noteworthy that the disjunctive word “or” is used between clauses (a) through (c). That suggests there are three separate possible time frames for a temporary lay-off as set out in the three clauses.

20In contrast, in clause (b), the word “and” is used to show there are two requirements for a lay-off exceeding the 13 weeks in clause (a): the lay-off is no more than 35 weeks in a period of 52 weeks and one of the requirements in paragraphs (i) to (vi) is met. Those requirements include employer payments to or on behalf of employees, but also include a recall of employees within a time approved by the Director or recall within a time set in an agreement with a non-unionized employee.

21While the union submitted that each of these requirements was a compensation for employees, designed to cushion the effects of the employee’s extended lay-off, these last two conditions do not provide compensation to the employees. Therefore, the words of s. 56(2)(b) do not support the union’s interpretation.

22The Court of Appeal in London Machinery described s. 56(2)(c) as a “stand alone” provision. There was no suggestion in the reasons of the majority that recourse to s. 56(2)(c) was subject to the conditions found in s. 56(2)(b).

23The arbitrator in the present case may have been in error in assuming that the employer in London Machinery did not continue benefits beyond the 13 week period. It appears that the health benefits and life insurance coverage of the grievor in that case were maintained throughout the entire lay-off period. However, this error of the arbitrator does not affect the reasonableness of his decision or his reliance on London Machinery.

24The issue in London Machinery was the interaction of ss. 56(2)(c) and 67 of the ESA. The latter provision deals with an employee’s right to elect to receive termination pay and severance pay instead of preserving recall rights under an employment contract. Section 67 applies if an employee with a right of recall is entitled to termination pay because of a lay-off of 35 weeks or more. According to Cronk J.A. for the majority (at para. 80):

As 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.

25Given the language of s. 56(2) of the ESA and the holding of the Court of Appeal in London Machinery, the arbitrator’s decision that s. 56(2)(a) did not apply was within a range of reasonable outcomes.

26Therefore, the application for judicial review is dismissed. As agreed by the parties, the respondent shall have costs fixed at $3,000.00.

Swinton J.

Cunningham A.C.J.S.C.J.

Carnwath J.