COURT FILE NO.: 124/08

DATE: 20090612

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

swinton, low and van RENSBURG JJ.

B E T W E E N:

TEMBEC ENTERPRISES INC.

Applicant

• and -

UNITED STEELWORKERS IWA COUNCIL 1-1000 and DANIEL A. HARRIS

Respondents

Kevin D. MacNeill, for the Applicant

Paula Turtle, for the Respondent United Steelworkers

Heard at Toronto: April 23, 2009

Swinton J.:

Overview

1Tembec Enterprises Inc. (the “Employer”) has brought an application for judicial review of the award of arbitrator Daniel Harris dated February 15, 2008, in which he held that there had been a deemed termination of the employment of the grievor. As a result, the grievor was entitled to notice of termination or termination pay in lieu and to severance pay.

Background

2The Employer is an integrated forest products company that operates a sawmill in Mattawa, Ontario. The United Steelworkers IWA Council 1-1000 (the “Union”) is the bargaining agent for a unit of employees at the Mattawa operation.

3The grievor was hired by the Employer in 1994. In March 2005, he suffered a work-related injury to his right hand and thumb. In mid-April 2006, he advised the Employer that he had developed permanent restrictions related to his right hand and thumb functions, and accommodation was provided in the workplace. On or about July 26, 2006, the Workplace Safety and Insurance Board (“WSIB”) advised the grievor that he had reached his maximum medical recovery (“MMR”) with respect to his right thumb injury as of April 13, 2006.

4Due to financial constraints and a downsizing, the Employer could not, given the grievor's seniority, continue to accommodate him within his restrictions on a permanent basis. Following a meeting on August 10, 2006, the Employer sent the grievor a letter informing him that his permanent restrictions limited him from performing most positions within the Employer’s operations, and that his seniority did not bring him within a position that respected his restrictions. The Employer also stated that it could not create the additional job or position that would be necessary to continue the accommodation of the grievor’s restrictions on a permanent basis. The only other alternative was to allow the grievor access to the WSIB’s Labour Market Re-entry service (“LMR”). The grievor was told that if he thought there was some production line function he could perform within his medical restrictions, he should inform the Employer.

5In the meeting on August 10, the Employer had also told the grievor that his extended health, dental and life insurance benefits (“benefit plans”) could be maintained for two years, as long as he paid his portion of the premiums in accordance with Article 29.03 of the collective agreement. The provision states that the Employer will provide extended health, dental and life insurance benefits for the first 24 months “while an employee is off work due to a medically certified disability”, provided the employee pays his or her normal portion of the benefit premium.

6By a letter dated August 16, 2006, the Employer informed the WSIB it was unable to continue accommodating the grievor with his permanent medical restrictions and the only alternative was to refer him to the LMR programme.

7A Record of Employment form was issued on August 25, 2006 stating that the grievor had been referred to the LMR programme.

8At a mediation meeting on September 5, 2006, the WSIB, the Employer and the grievor agreed that no accommodation could be found for the grievor in the workplace at that time.

9The grievor elected to continue his benefits and arranged for payment of coverage to the end of December 2006. In a letter dated September 18, 2006, he requested his accrued vacation pay for 2006-2007, stating that he was aware that if recalled, he would have no vacation monies owing.

10The grievor was assessed by the WSIB and, on October 12, 2006, he was admitted to an LMR programme to be trained as a heavy equipment operator. That training ended January 20, 2007.

11On February 5, 2007, the Union sent a letter to the Employer requesting severance pay on behalf of the grievor. On the same day, the grievor went to the Employer’s office to request and pay for continuation of his benefit plan coverage for the period December 31, 2006 to June 30, 2007. He was told that if he took severance pay, as requested by the Union, he was not eligible for benefit plan coverage. In response, the grievor asked the Employer not to proceed with the request for severance pay.

12The grievor had received a job offer from Janveaux Forest Products Inc. and started working with that company around February 12, 2007.

13On October 1, 2007, the Employer sent the grievor a letter stating that it had recently discovered his employment at Janveaux. The employer wrote that due to that employment, it would “acknowledge and accept that you have terminated your employment with Tembec”. The letter also advised that the grievor’s health benefits and seniority would cease immediately.

14On November 14, 2007, the Union filed a grievance alleging that the Employer had violated the Employment Standards Act, 2000, S.O. 2000, c. 41 (“ESA”) by failing to pay termination pay and severance pay to the grievor.

The Arbitration Award

15The parties proceeded before the arbitrator on the basis of a lengthy Agreed Statement of Facts. Testimony was also heard from the grievor and from Shelley Fraser, Human Resources Manager at the Mattawa sawmill.

16The Employer raised a preliminary objection to the arbitrator’s jurisdiction, claiming that the grievance was out of time. On the merits, the parties framed the issue for the arbitrator to decide as a question of whether the grievor had voluntarily quit his employment or whether he was terminated, expressly or by implication.

17The arbitrator found that the grievance was timely. He came to that conclusion by posing the question: what was the earliest date upon which the parties could have known that a dispute had arisen with respect to the severance/termination pay issue? He concluded that the dispute between the parties did not arise until October 1, 2007, when the Employer sent the letter to the grievor advising him of its view that he had quit his employment and, therefore, his benefits and seniority would cease. After that letter, the grievance was filed promptly.

18In the alternative, the arbitrator held that if the dispute arose earlier, there were reasonable grounds to extend the time limits pursuant to s. 48(16) of the Labour Relations Act, S.O. 1995, c. 1, Sch. A (the “LRA”), because of a misunderstanding between the grievor and Ms. Fraser arising out of a conversation on February 5, 2007. Furthermore, there was no prejudice to the Employer if the time limits were extended.

19On the merits, the arbitrator concluded that the facts did not support the view that the grievor had voluntarily quit his employment with the Employer (Reasons, para. 36). He noted that the Employer had specifically advised the WSIB and the grievor in August 2006 that it could no longer accommodate the grievor’s medical restrictions and requested that the WSIB re-train him for employment elsewhere.

20The arbitrator then reviewed the language of s. 63(1)(a) of the ESA, which states that an employer severs the employment of an employee if the employer “dismisses the employee or otherwise refuses to or is unable to continue employing the employee”. Similar language is used to determine when a termination occurs.

21The arbitrator found that the Employer was “unable to continue employing” the grievor and, as a result, had terminated and severed his employment within the meaning of the ESA (Reasons, para. 39). The arbitrator made no express finding as to the date on which the termination occurred.

22He then went on to consider whether any of the exceptions to the requirements to pay severance and termination pay set out in O. Reg. 288/01 applied. He concluded that they did not. At para. 40, he stated,

I find that by operation of O. Reg. 288/01, amended by O. Reg. 549/05, Mr. Blanchette [the grievor] is not prescribed as an employee who is not entitled to notice of termination or termination pay because his contract of employment had become impossible to perform. I also find, pursuant to the Act and Regulations that Mr. Blanchette is not prescribed as an employee who is not entitled to severance pay under s. 64 of the Act because his contract of employment had become impossible to perform. In both categories, the grievor falls into the saving provisions of the regulation because “the impossibility or frustration is the result of an illness or injury suffered by the employee”.

23As a result, he allowed the grievance and ordered the Employer to pay the grievor both termination and severance pay.

The Standard of Review

24In the course of rendering his decision, the arbitrator was required to interpret provisions of the collective agreement, the LRA and the ESA. Section 48(12)(j) of the LRA gives arbitrators the power to interpret and apply human rights and other employment-related statutes. Section 99(1) of the ESA provides that where an employer is bound by a collective agreement, the Act is enforceable against the employer as if it were part of a collective agreement with respect to any alleged contravention occurring while the agreement is in force. Thus, both the LRA and ESA are statutes with which arbitrators are particularly familiar and within their statutory mandate to apply. As well, the arbitrator was required to interpret provisions of the collective agreement. Therefore, the standard of review of the decision is reasonableness.

25The Employer also raised arguments of natural justice. Where a tribunal’s decision is attacked on the basis of a denial of procedural fairness or natural justice, it is not necessary to determine the standard of review. The issue to determine is whether the appropriate level of fairness was accorded.

The Evidentiary Record

26The Employer included in the Application Record an affidavit of Marc Tremblay, its Corporate Labour Relations Manager. In the affidavit, he set out a number of elements of testimony provided through the two witnesses who testified which the arbitrator failed to mention, as well as details with respect to submissions of the Employer’s counsel.

27That evidence is not admissible on this application for judicial review. Affidavit evidence is exceptional in such a proceeding. It is admissible to demonstrate an absence of evidence on an essential point in the decision or to show a breach of natural justice that cannot be proved by mere reference to the record (Keeprite Workers’ Independent Union v. Keeprite Products Ltd. (1980), 1980 1877 (ON CA), 29 O.R. (2d) 513 (Ont. C.A.) at p. 8 Quicklaw version). That was not the purpose of the affidavit evidence here, which was introduced to point to testimony and arguments that the arbitrator failed to deal with in his award.

28While Keeprite was decided some time ago, it remains the law in Ontario (see 142445 Ontario Limited, carrying on business as Utilities Kingston v. The International Brotherhood of Electrical Workers, Local 636, 2009 24643 (Div. Ct., May 15, 2009). Therefore, the affidavit is struck.

Issues

29The Employer raised the following issues:

1. Did the arbitrator reach an unreasonable decision on the timeliness objection to the grievance?

2. Did the arbitrator breach the rules of natural justice by deciding the grievance on a basis not advanced by the parties?

3. Did the arbitrator reach an unreasonable decision in finding that the grievor was entitled to severance and termination pay under the ESA?

4. Did the arbitrator deny procedural fairness by providing inadequate reasons for his decision?

Analysis

Issue No. 1: Did the arbitrator reach an unreasonable decision on the timeliness objection to the grievance?

30The grievance filed by the Union stated that the dispute between the parties arose from the failure of the Employer to pay the grievor termination and severance pay in accordance with the ESA. The arbitrator held that the date the difference between the parties arose was the date upon which the grievor learned that the Employer was asserting that he had voluntarily quit his employment – namely, October 1, 2007. It was only then it became clear the Employer would not be paying termination and severance pay.

31The arbitrator came to that conclusion based on his findings of fact. There was evidence to support his findings. It cannot be said that his decision on timeliness was unreasonable.

32In any event, he had the discretion to extend the time limit pursuant to s. 48(16) of the LRA. The Employer conceded it would not be prejudiced by an extension. The arbitrator considered the reasons for the delay in filing the grievance. He found that the grievor mistakenly believed, on February 5, 2007, that he would be entitled to severance pay on request because of a conversation with Ms. Fraser. She was unaware that he was then working for Janveaux.

33The arbitrator found that there was an ongoing relationship between the Employer and the grievor within which “neither had reason to believe that the clock was running against the filing of a grievance relating to the grievor’s change in employment status” (Reasons, para. 28). He concluded that there were, therefore, reasonable grounds to extend the time limits. There was evidence on which he could base that finding.

34Again, his decision to extend the time limits was reasonable. Therefore, this ground for review fails.

Issue No. 2: Did the arbitrator breach the rules of natural justice by deciding the grievance on a basis not advanced by the parties?

35The Employer submits that the award should be quashed because the arbitrator breached the rules of natural justice by deciding the grievance on a basis not submitted by the parties. The Union argues that the arbitrator decided the issue before him – namely, whether the grievor was entitled to termination pay and severance pay under the ESA.

36While the grievance is framed in terms of entitlements under the ESA, the issue stated by the arbitrator was whether the Employer terminated the grievor’s employment or he quit. At the arbitration hearing, the Union confirmed to the Employer and the arbitrator that it would not be arguing frustration within the meaning of the ESA. Its only position was that the referral to the LMR programme was a deemed termination (Reasons, p. 17).

37The arbitrator was of the view that “severance of employment occurs when it is properly concluded that an employee can no longer have her or his medical restrictions accommodated without undue hardship” (at para. 34). He concluded that the employer was unable to continue employing the grievor and communicated that fact to him in August 26, 2006 (Reasons at para. 36), and, therefore, pursuant to s. 63(1)(a) of the Act, the Employer severed the employment of the grievor.

38Section 63(1) of the ESA reads:

An employer severs the employment of an employee if

(a) the employer dismisses the employee or otherwise refuses or is unable to continue employing the employee …

Section 56(1) uses similar language in describing what constitutes termination.

39Sections 2(1) and 9(1) of O. Reg. 288/01 provide that certain employees are not entitled to notice of termination or to termination pay or to severance pay, including “[a]n employee whose contract of employment has become impossible to perform or has been frustrated”. These provisions do not apply to an employee whose contract of employment has become impossible to perform or frustrated as a result of an illness or injury suffered by the employee (ss. 2(3) and 9(2)(b)).

40The arbitrator held the grievor fell within the provisions of the regulation protecting an employee where his contract of employment has become impossible of performance or frustrated because of illness (Reasons, para. 40). Thus, the arbitrator decided this case on the basis of the regulations under the Act. He found the contract of employment impossible to perform – in other words, he found frustration because of illness or injury (at para. 40). Yet the Union had expressly stated that it was not arguing frustration of the employment contract (para. 22 of the Reasons).

41There is a line of arbitral jurisprudence which has found that there can be deemed termination of employment where the employment relationship is frustrated or impossible of performance because of illness. In those cases, the arbitrators have relied on the termination and severance provisions of the ESA, including the protection for employees unable to work because of illness or injury. In each case, the onus is on the union to prove frustration of the employment relationship and deemed termination or severance. This requires the union to lead evidence of the employee’s medical condition, the present incapacity to work, and the likelihood that incapacity will continue into the foreseeable future, notwithstanding reasonable accommodation (St. Joseph’s General Hospital and O.N.A. (2004), 2004 94805 (ON LA), 134 L.A.C. (4th) 86 (Luborsky) at paras. 32-34); St. Joseph’s General Hospital and O.N.A. (2006), 2006 53948 (ON LA), 148 L.A.C. (4th) 326 (Randall) at pp. 333-34; H.E. Vannatter Ltd. and UAW-CLC Local 251 (2008), 169 L.A.C. (4th) (Reilly) at pp. 408-09).

42In two of these cases, the grievor had been enrolled in an LMR programme with the WSIB. That fact alone was not determinative of the frustration issue. Moreover, one of the indications that an employment relationship continued was the continued participation of the grievor in company benefit plans.

43One aspect of natural justice is the requirement that parties be aware of the issues to be decided and be given an opportunity to address those issues. In this case, the arbitrator decided the grievance on the basis of the frustration provisions of the ESA without having given the parties an opportunity to address that issue with the proper medical evidence and in light of the factors to be considered. For this reason alone, the decision must be quashed.

Issue No. 3: Did the arbitrator reach an unreasonable decision in finding that the grievor was entitled to severance and termination pay under the ESA?

44The Employer also argues that the arbitrator reached an unreasonable decision. According to the Employer, the arbitrator gave an unreasonable interpretation to Article 18.03 of the collective agreement. Article 18 deals with leaves of absence requested by employees. Article 18.03 provides:

Leaves of absence will not be granted for reasons of self-employment or seeking alternate employment. If at any time, it is found that employees on leave have accepted employment elsewhere, either temporary or for trial purposes, the employee will be considered as having quit their job as of that time, and will have lost all of their seniority.

45In my view, the arbitrator reasonably concluded that this article did not apply to the grievor, as he was not on a requested leave of absence. By its terms, Article 18.03 deals only with an employee on an approved leave of absence who takes employment elsewhere and is, therefore, deemed to have quit.

46Nevertheless, I am of the view that the arbitrator’s decision was an unreasonable one on the merits.

47The arbitrator held that the grievor was entitled to both termination pay and severance pay. However, he never determined a date at which employment was terminated. For an employee to be entitled to termination pay, employment must be terminated without proper notice. Therefore, in order to calculate the termination pay to which the grievor is entitled, there must be a determination of the date of termination.

48One might infer the arbitrator concluded that referral to the LMR programme is a deemed termination, given the statement that severance of employment occurs when the grievor can no longer have his medical restrictions accommodated without undue hardship. However, if this was his conclusion, it is inconsistent with the Union submission that it relied on the WSIB mediator’s comment that severance was not payable until the end of the LMR (paras. 20 and 21) - although to be fair to the arbitrator, the Union seems to have taken a different position during the Employer’s reply submissions, stating that the referral to the LMR was a deemed termination (para. 22).

49Whether there was severance or termination requires a determination on the basis of all the evidence as to whether the employment relationship had come to an end. The arbitrator appears to have assumed that a continuing employment relationship coincided with active employment. However, the fact that an employee is absent from work due to workers’ compensation has been considered by arbitrators as a leave of absence (Community Social Services Employers’ Assn. and B.C.G.E.U., 2002 C.L.A.S.J. 5631 (Foley) at para. 22)

50In the present case, there was evidence of a continued employment relationship during and after the LMR programme that was not addressed by the arbitrator. In particular, the grievor continued his participation in employee benefit plans, and he remained on the seniority list through much of 2007. When he asked for his accrued vacation pay in September 2006, he acknowledged his recall rights. He explicitly told the Employer in February 2007 that he did not seek his severance pay when he was informed that he could no longer participate in the benefit plans if he did so.

51Moreover, there is no evidence that the Employer intended to terminate the grievor’s employment at the time of the referral to the LMR programme. In August 2006, the Employer asked the grievor whether there were other production jobs he could perform. The ROE stated that the reason for leaving employment was the referral to the LMR programme, not termination.

52In August 2006, the evidence showed that the grievor could not be accommodated. There is no mention in the award of evidence that he could not be accommodated in the future. As well, there was no evidence that the LMR programme was only to train for employment elsewhere, as the award states.

53The arbitrator failed to address the evidence suggesting there was continuing employment relationship up until the time the grievor accepted employment at Janveaux. While the standard of review of reasonableness requires deference to the arbitrator, this is a case where the decision is unreasonable, both because of the failure of the arbitrator to determine precisely when termination and severance occurred and, more importantly, because of the failure to consider important evidence of a continued employment relationship until the time the grievor accepted employment with Janveaux.

Conclusion

54Given my conclusion on issues two and three, I need not deal with issue four, the adequacy of the reasons.

55The application for judicial review is granted. The award of the arbitrator is quashed, and the merits of the grievance are remitted to be determined by another arbitrator selected by the parties. As agreed, costs to the Employer are fixed at $5,000.00 inclusive of disbursements and GST.

Swinton J.

Low J.

van Rensburg J.