The Society of Energy Professionals v. Ontario Power Generation Inc.

CITATION: The Society of Energy Professionals v. Ontario Power Generation Inc., 2014 ONSC 6693

DIVISIONAL COURT FILE NO.: 278/13

DATE: 20141127

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

C. McKINNON, SWINTON & HARVISON YOUNG JJ.

BETWEEN:

THE SOCIETY OF ENERGY PROFESSIONALS Applicant

– and –

ONTARIO POWER GENERATION INC. Respondent

COUNSEL:

Paul J.J. Cavalluzzo and Stephen J. Moreau, for the Applicant

Richard J. Charney and Pamela Hofman, for the Respondent

HEARD at Toronto: October 30, 2014

SWINTON J.:

Overview

[1] The Society of Energy Professionals (“the Society”) has brought an application for judicial review of an interest arbitration award on the grounds that the arbitrator denied it procedural fairness and made a key finding in the absence of evidence.

[2] For the reasons that follow, I would dismiss the application.

Background

[3] The Society is a union that represents engineers, scientists and other professional staff who work for the respondent Ontario Power Generation Inc. (“OPG”), a corporation wholly owned by the Government of Ontario. OPG and the Society (“the parties”) began bargaining for a new collective agreement in the fall of 2012 in anticipation of the expiry of their collective agreement on December 31, 2012. They were unable to reach an agreement during negotiations.

[4] Article 15 of the expired collective agreement provides for a mediation-arbitration process if the parties cannot reach an agreement through negotiations. The same person is to act as both mediator and arbitrator. Paragraphs (a) to (d) of the article set out four criteria to guide the arbitrator in determining monetary issues:

a) a balanced assessment of internal relativities, general economic conditions, external relativities;

b) OPG’s need to retain, motivate and recruit qualified staff;

c) the cost of changes and their impact on total compensation; and

d) the financial soundness of OPG and its ability to pay.

[5] The last paragraph of Article 15 deals with the process to be adopted and the final and binding nature of the award:

A mediator-arbitrator shall have the power to settle or decide such matters as are referred to mediation-arbitration in any way he/she deems fair and reasonable based on the evidence presented by representatives of OPG or The Society in light of the criteria in items (a) to (d) and his/her decision shall be final and binding.

[6] The parties exchanged briefs containing submissions and supporting documents on January 16, 2013. A primary issue in this round of bargaining was the wage increase for the Society’s members. The Society proposed a salary increase of 3% in each year of a three year collective agreement. In contrast, OPG proposed a 0% increase and a freeze on Step Progression through the salary grid for two years. Alternatively, OPG proposed that members progress normally on the salary grid through Step Progression, but that this increased cost should be offset by equivalent compensation reductions elsewhere. OPG’s proposal reflected a Government of Ontario directive to the broader public sector in the summer of 2012 that there be an “absolute zero” result to collective bargaining - that is, no compensation increase and offsetting savings if employees were allowed to move through the Step Progression in the salary grid of a collective agreement.

[7] The parties engaged in mediation on January 29 through 31, 2013, but without success in achieving a collective agreement. The arbitration phase began on January 31, 2013 with a motion before the arbitrator relating to the production of documents.

[8] The Society had sought documentation from OPG with respect to two issues: the allegation in OPG’s brief that it faced a financial loss of $125 million in 2013, and the costing of the settlement between OPG and the Ontario Power Workers’ Union (“PWU”), the principal internal comparator for the Society. Although the PWU members would receive salary increases of 2.75% in each year of their three year collective agreement, OPG took the position that offsetting savings had resulted in a “net zero” settlement (that is, increases in compensation were offset by savings elsewhere in the collective agreement). That settlement had been accepted by the Government of Ontario in accordance with the “net zero” mandate operative at the time.

[9] The Society sought documentation to back up both of these assertions. While OPG resisted providing the documentation, it offered, as a compromise, to provide a summary of the savings in the PWU agreement and a document on OPG’s economic state. It also offered to put forth its Vice President (Finance), John Mauti, for examination and cross-examination.

[10] The arbitrator issued a ruling in which he rejected the Society’s request for source documentation and accepted OPG’s proposal. In explaining his ruling, he emphasized the distinct nature of interest arbitration as an extension of collective bargaining. As well, he noted that it was unusual to have a witness such as the Vice President testify. In particular, he stated (Award, para. 15):

The procedure of an interest arbitration, particularly in the context of a mediation-arbitration such as this, under Article 15 of the collective agreement, is designed to expedite the resolution of the disputes and to avoid a long and detailed hearing. Speed and informality are traded for the precise investigative characteristics of court trials. There is a robustness to the conduct of interest arbitration. Each party provides the evidence it considers relevant in its brief, very occasionally supplemented by oral evidence, and disputes of fact are left to the arbitrator to determine on a balance of probability. The evidence referred to in Article 15 is the evidence the parties consider relevant to present for consideration by the arbitrator. Not every document any party wishes to have forms part of an interest arbitration, and nor does natural justice require that. The arbitrator must be placed in the position, as here, where the parties provide the information they consider relevant, supplemented by oral argument on what they and the other party have submitted. ...

[11] The arbitrator also stated that he would determine whether he needed further information after he heard the witness testify and considered the information he had, as well as the submissions of the parties.

[12] OPG provided a one page document showing the “zero cost” of the PWU agreement. The document, as revised, sets out categories of savings with a percentage for each category and a total of $65 million (Application Record, p. 356). At the beginning of the arbitration hearing on February 23, OPG also provided a confidential document on the projected loss of $125 million in 2013. Mr. Mauti, the Vice President (Finance), testified and was cross-examined with respect to financial projections and the structure of savings in the PWU agreement.

[13] During Mr. Mauti’s testimony, it became apparent that the calculations of the increases in the PWU agreement did not include compounding and that they had been determined on an annual basis for the purpose of the “net zero” mandate. At the arbitrator’s request, Mr. Mauti revised the calculation of the cost of the PWU agreement by compounding the annual increases to PWU. The result of the recalculation was an increased cost of the PWU agreement that brought it closer to the Society’s view of the cost of that agreement. However, Mr. Mauti also added in burden costs, thus reducing the effective wage increase for PWU members to 0.73% per year. The Society was able to cross-examine Mr. Mauti on the revised calculation.

[14] During the hearing, the Society renewed its request for source documents, which was refused on February 24, 2013.

[15] After hearing submissions from the parties, the arbitrator issued a detailed and lengthy award. He carefully considered the criteria set out in Article 15, emphasizing, in particular, the factor of comparability with the PWU bargaining unit. He rejected the OPG proposal for a zero salary increase, finding that there had been a total compensation adjustment for the PWU amounting to a yearly increase of 0.75% (Award, paras. 17, 59).

[16] The arbitrator then considered the OPG proposal for a freeze on automatic Step Progression in the salary grid. In its brief, OPG calculated the cost of a two year grid freeze as $15.3 million (OPG Brief, para. 161). The Society did not take issue with the figure in its brief (Society Brief, para. 35). In his award, the arbitrator stated that the freeze on Step Progression would be equivalent to approximately 1% of the Society wage cost. While the Society takes issue with this 1% figure in the present application for judicial review, I note that in the OPG Brief the cost of a 1% salary increase is said to be about $7.8 million per year (at para. 148).

[17] The arbitrator determined that there should be a three year collective agreement commencing January 1, 2013. In years two and three, there would be a freeze on Step Progression. He awarded salary increases of 0.75% in 2013, 1.75% in 2014 and 1.75% in 2015. The extra 1% in the last two years reflected the savings to OPG of the freeze on Step Progression through the salary grid. The award also deals with a number of other issues in dispute between the parties that need not be set out here.

The Issues

[18] The Society argues that the arbitrator made three key findings contrary to the rules of procedural fairness: that a 1% wage increase would offset the Step Progression freeze awarded; that OPG faced a projected loss of $125 million in 2013; and that the PWU collective agreement represented a 0.75% annual cost to OPG. Essentially, the Society argues that the arbitrator had a duty to disclose the dispute between the parties concerning the cost of the Step Progression freeze so that it could make submissions on this issue. As well, he should have ordered disclosure of documents concerning OPG’s projected loss and the costing of the PWU collective agreement so that the Society could know and meet the case against it.

[19] In addition, the Society submits that the 1% finding with respect to the Step Progression freeze was made without evidence and, therefore, the finding was unreasonable.

Analysis

The Scope of the Duty of Procedural Fairness

[20] In reviewing a decision on the grounds of procedural fairness, a court need not determine the standard of review. Rather, the task of the court is to determine whether the appropriate level of procedural fairness has been accorded (Canada (Citizenship and Immigration) v. Khosa, 2009 SCC 12, [2009] 1 S.C.R. 339 at para. 43; London (City) v. Ayerswood Development Corp. (2002), 167 O.A.C. 120 (C.A.) at para. 10).

[21] In determining the scope of the duty of fairness, a court must have regard to the factors set out in Baker v. Canada (Minister of Citizenship and Immigration), [1999] 2 S.C.R. 817 at paras. 23-27: the nature of the decision being made and the process followed in making it; the nature of the statutory scheme; the importance of the decision to the individual(s) affected; the legitimate expectations of the person challenging the decision; and the choice of procedures made by the decision-maker.

[22] In the present case, the arbitrator’s task was to determine the terms of the new collective agreement for the parties. Interest arbitration is an extension of collective bargaining, and the role of the interest arbitrator has been described by the Supreme Court of Canada as “more or less legislative” in nature. In contrast, a rights arbitrator, in determining a grievance, performs an adjudicative role (Canadian Union of Public Employees (C.U.P.E.) v. Ontario (Minister of Labour), 2003 SCC 29, [2003] 1 S.C.R. 539 at para. 53). Accordingly, the process of interest arbitration is more flexible and less formal than rights arbitration.

[23] The arbitrator has the powers set out in s. 48(12) of the Labour Relations Act, 1995, S.O. 1995, c. 1, Sched. A, including the power to require any party to produce documents that may be relevant to the matter. However, even more important than the statutory scheme is the power conferred on the arbitrator by the parties in their collective agreement. An interest arbitrator acting under Article 15 is given a broad discretion to determine the matters before him/her “in any way that he/she deems fair and reasonable”, provided that he/she decides on the basis of the evidence presented by the parties.

[24] While the determination of terms and conditions of employment, including salary, is of importance to the parties to the collective agreement, the interests at stake here do not rise to the same significance as deportation in a case such as Baker, above, or loss of a licence in a professional discipline context.

[25] To the extent that the factor of legitimate expectations plays a role in this case, the parties’ expectation is to have the opportunity to provide evidence and submissions in a process that is meant to be informal and an extension of collective bargaining.

[26] The fifth Baker factor, the choice of procedures made by the decision-maker, is significant here, given that the parties conferred a discretion on the arbitrator to determine matters in a way that he found fair and reasonable. Some deference is, accordingly, owed to the choice of procedures and, in the present case, the rulings on appropriate disclosure.

[27] In my view, these factors suggest that the level of procedural fairness operative in the present case is not at the higher level of the spectrum that one would find in a professional discipline case or in a rights arbitration. With that in mind, I turn to the particular allegations of unfairness raised by the Society.

The Finding With Respect to the Step Progression Freeze

[28] The arbitrator concluded that freezing the progression on the salary grid would be offset by a 1% wage increase in each of the two years of the freeze. The Society argues that this 1% cost figure had been disclosed in a document that OPG gave the arbitrator during the mediation stage, with instructions that the information could be shared with the Society. However, the document was not given to the Society during the mediation, presumably because the mediator saw no utility to doing so.

[29] During mediation, the Society took the position that a 2% wage increase was needed to offset the Step Progression freeze. Accordingly, the Society submits that in the arbitration phase, there was a serious factual dispute between the parties about the cost of a grid freeze of which it was not aware, and the arbitrator should have raised the dispute with the parties and heard submissions on costing the Step Progression freeze before coming to a decision. Moreover, the Society submits that if the arbitrator was going to adopt the OPG costing of 1% per year, he should have disclosed the OPG document from the mediation to the Society and given it a chance to make submissions. In the circumstances, the Society claims that there was a denial of procedural fairness because it did not have the opportunity either to know the case against it or to meet that case.

[30] In the alternative, the Society argues that there was no evidence to support the finding that a 1% wage increase each year was equivalent to the savings from a one year freeze on Step Progression. Accordingly, the finding was unreasonable.

[31] Dealing with the absence of evidence argument first, I note that there was evidence in the parties’ briefs to support the 1% figure. OPG stated in its brief that the Step Progression savings were approximately $15.3 million over a two year period or approximately $7.65 million per year on average. It also stated that the cost of every 1% in increased wages would be approximately $7.8 million. The Society, in its brief, accepted that the cost to OPG of a two year grid freeze was approximately $15.3 million (OPG Brief, paras. 148-49, 161; Society Brief, para. 35).

[32] Given these statements in the briefs, there was evidence on which the arbitrator could reasonably rely in coming to the conclusion that an additional 1% salary increase was warranted in years two and three of the collective agreement to offset the Step Progression freeze in those years.

[33] The more significant question is whether the Society was denied the right to know the case and to respond. The Society submits that the arbitrator should have disclosed the factual dispute between the parties concerning the cost of the Step Progression freeze, noting that he had the authority to share the OPG costing document during the mediation.

[34] In my view, there was no denial of procedural fairness by the arbitrator in coming to a decision on the 1% figure assigned to the Step Progression freeze. Whether or not the mediator had the authority to disclose OPG’s costing document during the mediation, he was not obliged to do so. Moreover, the conduct of the mediation is not a matter for this judicial review. Indeed, that process was without prejudice, as it was aimed at achieving a settlement.

[35] Once mediation ended, the parties entered into the arbitration phase. At the arbitration stage, the arbitrator had no obligation to raise issues discussed in mediation. It was up to the parties to raise the issues in dispute and make their submissions about them. Clearly, the parties had a dispute about the Step Progression, as OPG wanted a freeze and the Society opposed that position.

[36] From the briefs filed, the Society had to have been aware there was a dispute about the Step Progression: OPG’s brief set out its estimated cost of the Step Progression as well as the annual cost of a 1% wage increase. Even if the cost of the Step Progression was expressed in dollars rather than a percentage, the Society had to know that OPG assigned a value to the Step Progression and what that value was. There is no evidence that OPG ever departed from those figures. Accordingly, if the Society disputed those figures, it could have and should have made that known to the arbitrator. Otherwise, it faced the risk that the arbitrator would accept the costing figures from OPG.

[37] Having failed to raise the issue of the value of the freeze on Step Progression before the arbitrator, the Society cannot now claim a denial of procedural fairness.

The Disclosure Issue

[38] The Society argues that it was also denied procedural fairness because the arbitrator failed to order OPG to disclose source documents concerning the forecast loss of $125 million in 2013 and the documents submitted to the Ontario Government in 2012 showing the basis for a net zero cost of the PWU collective agreement. Without these documents, the Society argues that it could not carry out an effective cross-examination of Mr. Mauti, and thus it was deprived of an opportunity to make its case.

[39] In the January 31 ruling on disclosure, the arbitrator refused to order the production of the source documents. He concluded that the production of the one-page “net zero” document and a financial projection document, coupled with the evidence and cross-examination of Mr. Mauti, would provide the Society with sufficient disclosure to argue its case. The Society subsequently had the opportunity to question Mr. Mauti about the value of the PWU agreement and about the financial situation facing OPG.

[40] In the January ruling, the arbitrator left open the possibility of ordering further disclosure. However, he refused to make such an order, when asked again to do so by the Society. In his view, there had been adequate production to allow him to resolve the issues in dispute.

[41] The failure to order production of documents is not, in and of itself, a denial of procedural fairness. Rather, the Society must show that the documents are so important to its case that the failure to produce the documents has resulted in an unfair process. In my view, the Society has not met this burden.

[42] The interest arbitration process is not akin to a civil trial with a discovery process in which a party is required to disclose arguably relevant documents. Rather, the process is an extension of collective bargaining, where the parties present their briefs and arguments. In the present case those briefs were supplemented by viva voce evidence. Although the arbitrator has the statutory authority to order production of documents, his disclosure rulings are entitled to deference, given the broad power conferred in the collective agreement to determine matters in the fashion the arbitrator finds fair and reasonable. Moreover, he was in the best position to decide whether further information was needed to assist him after hearing the evidence of Mr. Mauti and after considering whether further disclosure would interfere with the speed and informality of the process. In my view, his disclosure rulings were reasonable.

[43] The present case is not like those where an interest arbitrator has been accused of denying procedural fairness because he or she relied on information that was not available to the parties and which they had not been given an opportunity to address. See, for example, R. v. Schiff, [1970] 1 O.R. 752 (H.C.J.) and Revera Retirement LP v. Armstrong, 2010 ONSC 3041 (Div. Ct.).

[44] Moreover, the Society has not demonstrated that the failure to produce the documentation affected the overall fairness of the process. While the Society sought to challenge the projected loss figure for 2013, the arbitrator’s conclusions on the OPG’s financial soundness and ability to pay did not rest only on a finding of that projected loss. Indeed, he never mentioned the figure of $125 million. His task was to determine the potential for future loss and the financial pressures facing OPG as part of the “ability to pay” criterion. In doing so, he considered a number of factors, in addition to a projected loss: for example, increasing competition in the electricity market, regulatory pressure from the Ontario Energy Board, declining electricity demand and increased costs. Both OPG and the Society presented detailed information addressing these facts in their briefs, as well as information on the other relevant considerations in Article 15. One can assume that many of these issues were also addressed in oral submissions.

[45] With respect to the “net zero” document provided to the Government, the arbitrator reasonably refused production. That document related to another bargaining unit, and it is reasonable to expect confidentiality with respect to the labour relations of the PWU bargaining unit. Moreover, the document was calculated without compounding, as the Government did not require compounding. It was reasonable for the arbitrator to conclude that the document would not assist in the present proceeding.

[46] In conclusion, the arbitrator made reasonable rulings on disclosure. The Society was not denied procedural fairness, as it was given ample opportunity to address the issues in dispute in the interest arbitration - indeed, more than the usual opportunity, given the evidence and cross-examination of Mr. Mauti.

The Revised Calculation

[47] The Society also takes issue with the revised costing of the PWU agreement by Mr. Mauti that occurred while he was being cross-examined. At the arbitrator’s request, Mr. Mauti recalculated the cost so as to take account of compounding. The Society argues that it had insufficient time to examine these calculations before cross-examining.

[48] Again, there was no denial of procedural fairness. There is no evidence that the Society objected to the procedure adopted by the arbitrator at the time, nor that it complained of insufficient time to prepare for cross-examination. The Society had an opportunity to cross-examine Mr. Mauti on the revised calculations, and in doing so, it had the assistance of its actuary, who was present during the proceeding. As in Bowater Mercury Paper Co. v. Communications, Energy and Paperworkers Union of Canada, Local 141, 2010 NSCA 19 at para. 56, it is now too late to complain about the process adopted.

The Affidavit Evidence

[49] The Society included a detailed affidavit from Staff Representative Andre Kolampar in the Application Record. The affidavit sets out information about the mediation stage of proceedings, as well as notes taken by Society officials of the evidence of Mr. Mauti and the submissions. OPG brought a motion to strike parts of the affidavit, but the motions judge dismissed the motion, without prejudice to the right to bring a renewed motion to the panel hearing the application for judicial review.

[50] By the time of the hearing of the application, OPG had itself filed a responding affidavit giving its version of the arbitration process, as a precautionary measure. While OPG made arguments on the inadmissibility of the Society affidavit in its factum, it did not pursue the argument in any detail in oral submissions.

[51] While the Court need not rule on the merits of the motion to strike, there is no question that significant portions of the Kolompar affidavit fail to meet the exceptions for the admission of such evidence set out in Keeprite Workers’ Independent Union and Keeprite Products Ltd. (1980), 29 O.R. (2d) 513 (C.A.) at para. 25). For example, they contain notes of evidence at the arbitration hearing that are not addressed to an issue of procedural fairness, and they also contain argument or disclose privileged settlement discussions.

Conclusion

[52] For these reasons, the application for judicial review is dismissed. Costs to OPG are fixed at $20,000.00 all inclusive, an amount agreed upon by the parties.

Swinton J.

C. McKinnon J.

Harvison Young J.

Released: November 27, 2014

CITATION: The Society of Energy Professionals v. Ontario Power Generation Inc., 2014 ONSC 6693

DIVISIONAL COURT FILE NO.: 278/13

DATE: 20141127

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

C. McKINNON, SWINTON & HARVISON YOUNG JJ.

BETWEEN:

THE SOCIETY OF ENERGY PROFESSIONALS Applicant

– and –

ONTARIO POWER GENERATION INC. Respondent

REASONS FOR JUDGMENT

Swinton J.

Released: November 27, 2014