CITATION: United Steel v. Georgia-Pacific LP, 2020 ONSC 1560

DIVISIONAL COURT FILE NO.: DC-0011

DATE: 2020/04/16

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

Ellies R.S.J., Sachs and Favreau JJ.

BETWEEN:

United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union, (United Steel Workers), Local 14994

Applicants

– and –

Georgia-Pacific LP and Ken Petryshen

Respondents

Shaheen Hirani, for the Applicants

George Waggott, for the Respondents

HEARD at Hamilton: February 5, 2020

H. Sachs J.

Overview

1This is an application for judicial review brought by the Applicant Union to quash and set aside the decision of arbitrator Ken Petryshen (the “Arbitrator”) dated December 3, 2018. The decision arose out of three grievances filed by the Union on behalf of six employees. In the grievances, the Union claimed that Georgia-Pacific Canada LP (the “Employer”) had contravened the collective agreement by denying the employees prescribed pension enhancements known as “grow-in benefits”, which are provided for in the Ontario Pension Benefits Act, R.S.O. 1990, c. P.8 (the “PBA”).

2The purpose of the grow-in benefit is to provide an enhanced level of income security at retirement to older or long-service defined benefit pension plan members who lose their employment before they are eligible to receive a pension. As long as certain criteria are met, the grow-in benefit allows plan members to “grow into” their retirement benefits at the age they would have become eligible for their benefits as if they had continued working for the employer.

3An employee’s entitlement to the grow-in benefit under the PBA is triggered by an “activating event” as defined in the legislation. One of the activating events is an employer’s termination of a plan member’s employment.

4In this case the employees had been indefinitely laid off following the idling of the plant that they worked in. The issue is whether or not the employees in question were terminated by the employer so as to trigger their entitlement to the grow-in benefit under the PBA when they were given their notices of indefinite layoff. Under s. 56(1) of the Employment Standards Act, 2000, S.O. 2000, c. 41 (the “ESA”) an employer “terminates the employment of an employee” if “the employer lays the employee off for a period longer than the period of a temporary lay-off” (in this case 35 weeks).

5Pursuant to an agreement negotiated between the Union and the Employer, the employees who were laid off could elect at any time to either take their severance pay or to retain their recall rights. The six employees who are the subject of the grievances elected, shortly after their layoff and before the expiration of 35 weeks, to forgo their recall rights and accept severance pay.

6The Arbitrator found that the employees had not been “terminated” within the meaning of the PBA and, therefore, dismissed the grievances. In doing so he relied on a section in the PBA that provides that “termination of employment is not an activating event” if “[t]he employee is only on temporary lay-off within the meaning of subsection 56(2) of the Employment Standards Act, 2000.”

7Under s. 56(2)(b) of the ESA, a temporary layoff can be a layoff of up to 35 weeks where one of the requirements in paragraphs (i) to (vi) is met. According to the Arbitrator, the Employer did not terminate the employees who were the subject of the grievance. They terminated their own employment when they chose to give up their recall rights in exchange for severance pay. By terminating their own employment before the 35 week temporary layoff period had expired, they forfeited their rights to grow-in benefits.

8However, in his reasons, the Arbitrator failed to consider s. 4(2) of Regulation 288/01 made under the ESA (the “Regulation”). The section was not brought to his or our attention by either of the parties. This court raised the issue with the parties in writing before the hearing and asked them to address it, which they did.

9Under s. 4(2) of the Regulation, if an employer is or will be laying off an employee for a period that may exceed the period of temporary layoff and doing so might be considered a breach of the collective agreement, “the employer may provide the employee with a written notice of indefinite lay-off and the employer shall be deemed as of the date on which that notice was given to have provided the employee with a notice of termination.”

10The employees who were the subject of the grievances in this case were all provided with a written notice of indefinite layoff by the Employer. This notice may have been reflective of the fact that the Employer knew that the period of layoff would exceed the temporary layoff period of 35 weeks. Pursuant to the provisions of s. 4(2) of the Regulation, the employer may be deemed to have terminated the employees in question as of the date of the notice of indefinite layoff. If this is the case, they may be entitled to grow-in benefits.

11In my view, the failure of the Arbitrator to consider s. 4(2) of the Regulation constitutes a “gap” in his reasons that renders his decision unreasonable. Therefore, I would allow the application and set aside his decision. My reasons for doing so are more fully explained below.

Factual Background

The Parties

12The Employer operated a gypsum plant in Caledonia, Ontario, for many years. The head office of the Employer is located in Atlanta, Georgia.

13The Applicant Union was the exclusive bargaining agent for a unit of hourly employees at the plant. At the time of the events giving rise to this application, there were approximately forty-eight employees in the bargaining unit represented by the Union, the vast majority of which were between 50 and 60 years old.

14The Union filed three grievances dated September 3, 2014, October 6, 2014 and January 19, 2016 covering a total of five employees (and later adding a sixth employee) alleging that the Employer had violated the collective agreement and/or pension legislation by failing to apply the grow-in provisions of the PBA to the pension benefits of the grievors. The Employer disputed the timeliness of the grievance filed on behalf of one grievor, Mr. Johnson. In view of the fact that he dismissed the grievances, the Arbitrator did not give a ruling on the timeliness of Mr. Johnson’s grievance.

15One of the grievors, Mr. Riddell, applied for his pension on September 18, 2015. He received a pension of $204.92 per month. With grow-in benefits his monthly pension would be approximately $1100 per month. In addition, he would have been entitled to a bridging benefit of between $10,000 to $30,000 of commuted value. The other grievors are in a similar situation.

16When Mr. Riddell gave up his recall rights in exchange for severance, he was 10 months short of his 55th birthday (the date he would have been entitled to his full pension). Another grievor, Mr. Johnson, was a month shy of his 55th birthday when he did the same thing and many of the other grievors also had less than a year to go until they were 55 when they elected to receive their severance pay.

The Pension Plan

17The parties were subject to a collective agreement that operated from April 1, 2009 to March 31, 2015 . Article 24 of the collective agreement provided for a company pension plan, which was a single-employer, defined benefit plan.

18Pension plans in Ontario are subject to the provisions of the PBA. Collective agreements in Ontario are subject to the provisions of the ESA (see s. 99 of the ESA, which provides that the ESA is enforceable as if it were part of the collective agreement).

The Events Leading to the Grievances

19On November 13, 2013 the Employer circulated a memorandum announcing that it would be idling the plant in 2014.

20On January 30, 2014 a letter was sent to employees advising them that a decision had been made to proceed with idling the Caledonia plant after March 28, 2014. On that date or shortly thereafter, the grievors received individual written notices advising them that they would “be indefinitely laid off as of March 28, 2014.” That notice stated that “[s]everance pay will be made available should the layoff exceed 35 weeks.”

21On March 24, 2014 the parties signed a Memorandum of Settlement (the "MOS") for the period from April 1, 2014 through March 31, 2015. The recital to the MOS provides:

The Company and Union have negotiated all pertinent matters arising from the indefinite curtailment of this facility. This Agreement applies to those employees who are laid off as a result of the indefinite curtailment and may be terminated during the term of this collective bargaining agreement due to the indefinite curtailment. The parties agree that the current collective bargaining agreement will continue with the following understanding…

22The MOS goes on to state the following:

1. Statutory Severance: The Company shall offer statutory severance pay to eligible employees who are released from employment prior to, at and after the idling of operations.

a) All employees whose employment is severed shall be paid any severance pay to which they are entitled under the provisions of the Employment Standards Act, 2000.

b) For the purposes of this agreement, Statutory Notice Period shall mean eight (8) weeks prior to the date of indefinite layoff specified in the notice of indefinite layoff or such lesser period as the Employment Standards Act, may require.

c) An employee who is indefinitely laid off by the Company and who accepts statutory severance pay shall, from and after the date of his termination or layoff, no longer be considered an employee of the company…

23After the signing of the MOS, the grievors received letters advising them that they had two options as a result of their having been laid off on March 28, 2014. The first option was to maintain their recall rights to a maximum of thirty-six months (the time provided for in the collective agreement between the parties). Under this option the employees would receive no severance pay unless they elected to receive such severance pay prior to the expiration of their recall rights. The second option was to renounce their recall rights.

With this option [the second option] you will be deemed terminated under section 56(1) of the ESA, 2000 and you will lose all seniority rights under Article 7.03 (d) of the Collective Agreement. In this case you will receive severance pay if applicable under section 64 of ESA, 2000. [emphasis added.]

24All of the grievors elected to take the second option and they did so prior to the expiration of thirty-five weeks from their notices of indefinite layoff. As a result, the pension administrator, on behalf of the Employer, calculated their pensions without including any grow-in benefits (including “bridging benefits”) as provided for under the PBA. None of the grievors were advised beforehand that the result of exercising the second option would be to lose their “grow-in” benefits.

The Legal Framework

The PBA

25Section 74(1.3) sets out the entitlement to “grow-in” benefits:

Grow-In Benefits – s. 74(1.3)

A member in Ontario of a pension plan whose combination of age plus years of continuous employment or membership in the pension plan equals at least 55 on the effective date of the activating event has the right to receive,

(a) a pension in accordance with the terms of the pension plan, if, under the pension plan, the member is eligible for immediate payment of the pension benefit;

(b) a pension in accordance with the terms of the pension plan, beginning at the earlier of,

(i) the normal retirement date under the pension plan, or

(ii) the date on which the member would be entitled to an unreduced pension under the pension plan if the activating event had not occurred and if the member’s membership continued to that date; or

(c) a reduced pension in the amount payable under the terms of the pension plan beginning on the date on which the member would be entitled to the reduced pension under the pension plan if the activating event had not occurred and if the member’s membership continued to that date.

26Section 74(3) addresses bridging benefits:

Bridging Benefits – s. 74(3)

Bridging benefits offered under the pension plan to which a member would be entitled if the activating event had not occurred and if his or her membership were continued shall be included in calculating the pension benefit under subsection (1.3) of a person who has at least 10 years of continuous employment with the employer or has been a member of the pension plan for at least 10 years.

27As noted above, the effect of these sections is to allow plan members who meet the criteria set out in the PBA to grow into their retirement benefits at the age they would have become eligible for their benefits as if they had continued working for their employer.

28These benefits are only available if an employee ceases to be a member of the pension plan as a result of an “activating event” as that term is defined in the PBA. The issue in this case is whether the grievors ceased to be members of the pension plan as a result of an activating event.

Activating Events – s. 74(1)

29Section 74(1) defines what is an activating event. The relevant portion of that definition for this proceeding is set out at s. 74(1)2 which reads:

The employer’s termination of the member’s employment, if the effective date of the termination is on or after July 1, 2012. However, this paragraph does not apply if the termination occurs in any of the circumstances described in subsection (1.1).

30Subsection 74(1.1) states:

Termination of employment is not an activating event if the termination is a result of wilful misconduct, disobedience or wilful neglect of duty by the member that is not trivial and has not been condoned by the employer or if the termination occurs in such other circumstances as may be prescribed. [Emphasis added.]

31Regulation 909 prescribes the “other circumstances” when termination of employment will not be an activating event. Under s. 30.1(2)2 of that regulation, one of those circumstances is when “[t]he employee is only on temporary lay-off within the meaning of subsection 56(2) of the Employment Standards Act, 2000.”

32According to the Employer, the grievors were not entitled to grow-in or bridging benefits because they were on temporary layoff within the meaning of s. 56(2) of the ESA at the time they elected to receive their severance pay, thereby terminating their own employment.

The ESA

33By virtue of s. 99 of the ESA, the provisions of that Act are “enforceable against the employer as if it were part of the collective agreement”.

34Part XV of the ESA deals with termination and severance of employment.

35Under s. 56(1)(c) of the ESA an employer terminates the employment of an employee if “the employer lays the employee off for a period longer than the period of temporary lay-off.” Further, pursuant to s. 56(5) of the ESA “[i]f an employer terminates the employment of an employee under clause (1)(c), the employment shall be deemed to be terminated on the first day of the lay-off.”

36Under s. 56(2)(b) of the ESA a temporary layoff is a layoff of “less than 35 weeks in any period of 52 consecutive weeks” where one of the requirements in paragraphs (i) to (vi) is met.

37Thus, if an employer lays off an employee for more than 35 weeks the employer will be considered to have terminated the employee as of the date of the notice of layoff. If the employer lays an employee off for a period of less than 35 weeks the employer will not be considered to have terminated the employee, so long as one of the requirements in paragraphs (i) to (vi) is met.

38In this case, the Employer notified the grievors that they were going to be subject to a period of indefinite layoff. The question then becomes whether this was a layoff of more than 35 weeks. To answer this question two provisions of the ESA are relevant.

39The first is s. 56(4) which reads:

An employer who lays an employee off without specifying a recall date shall not be considered to terminate the employment of the employee, unless the period of the lay-off exceeds that of a temporary lay-off.

40The second is s. 4(2) of the Regulation. It reads:

If an employer bound by a collective agreement is or will be laying off an employee for a period that will or may be longer than a temporary lay-off and the employer would be or might be in breach of the collective agreement if the employer advised the employee that his or her employment was to be terminated, the employer may provide the employee with a written notice of indefinite lay-off and the employer shall be deemed as of the date on which the notice was given to have provided the employee with a notice of termination.

41In his reasons the Arbitrator considered the effect of s. 56(4). However, he did not advert to or consider s. 4(2) of the Regulation. According to the Union, the Employer’s notice to the grievors was a notice of indefinite layoff that recognized that the period of layoff could or would exceed 35 weeks. It was not simply a notice without a recall date that could be considered a notice of temporary layoff.

The Arbitrator’s Decision

42The Arbitration was held on November 28, 2016. Final arguments were made by way of written submissions. The Arbitrator released his decision dismissing the grievances on December 13, 2018.

43The Arbitrator found that the “termination” of the grievors’ employment occurred on the date that they renounced their recall rights and accepted their severance pay. It did not occur when the Employer gave notice of indefinite layoff. According to the Arbitrator:

When their layoff commenced, the grievors maintained their status as employees on temporary layoff under the ESA, with recall rights under the Collective Agreement. As laid off employees, the Employer did not refuse to employ the grievors and was not unable to continue to employ them because they remained employees until they elected to forfeit their recall rights and take severance pay. Once a grievor made his election on recall rights, his employment relationship with the Employer ended. Once the grievors were no longer employees of the Employer, it cannot be said that the Employer refused or was unable to continue employing them (Arbitrator’s Decision, para. 40).

44In coming to this conclusion, the Arbitrator dealt with a submission by the Union that the Employer laid off the grievors because of a permanent discontinuance of all of its business in Caledonia. Under s. 63(1)(d) of the ESA, an employer “severs the employment of an employee if … the employer lays the employee off because of a permanent discontinuance of all of the employer’s business at an establishment.” The Arbitrator found that the evidence on this point was not “extensive”. It consisted of the fact that after the layoff all raw materials were removed from the plant and the plant never reopened. After considering this evidence, he concluded at para. 45:

I find that the Union has not established that the employment of the grievors was severed because they were laid off on the basis of the circumstances described in s. 63(1)(d). What occurred at the Caledonia plant just before the layoff in March 2014, including the removal of raw materials, is not inconsistent with a layoff that was expected to last for a lengthy period of time. The fact that the plant has not been operating for many years might suggest “permanent discontinuance”, but by itself is not conclusive. At the time the layoff notices were issued to employees, the Employer used the terms “idling” and “indefinitely laid off.” Rather than a permanent discontinuance, as argued by the Union, the term “idling” in reference to a business more likely suggests a period of time when the business would stop operating, but could continue operations if market conditions improved. The term “indefinitely laid off” indicates uncertainty about the length of the layoff, but does not necessarily indicate permanency. As Employer counsel noted, the layoff notices reference the possibility that that the layoff could exceed 35 weeks and mentions how employees could be contacted should it be necessary to recall an employee to work…At around the time of the layoff notice, the Employer anticipated the need to recall at least one employee. And indeed, one employee was recalled and performed shipping work for many months.[This work involved shipping the raw materials out of the plant.]

45The Arbitrator found that the circumstances of the grievors’ termination did not constitute an activating event under s. 74(1)2 of the PBA. In doing so he was “not satisfied that the grievors ceased to be members of the Plan because of the Employer’s termination of their employment” (para. 52). As further explained by the Arbitrator at para. 53:

The words, “the employer’s termination of the member’s employment” in s. 74. (1) 2 suggest that the employer was in some way responsible for causing the termination of the employment. In assessing whether the Employer was in some way responsible for the termination of the employment of the grievors, it is appropriate to ask if the Employer played a role in the specific circumstances which led to the ending of the employment relationship. There is no doubt about the specific circumstances that led to the termination of the grievors’ employment. After being indefinitely laid off by the Employer on March 2014, each grievor was presented with the opportunity to elect to renounce their recall rights and to take severance pay. Whether by the terms of the Memorandum or by the wording of the April 2, 2014 severance letter, the grievors were informed that their employment relationship with the Employer would end if they renounced their recall rights and accepted severance pay. Each grievor had the option to retain their recall rights and their status as employees. The testimony of Mr. Scibetta and Mr. Riddell confirmed that it was entirely up to each grievor to choose whether and when to forfeit their recall rights. Without any involvement of the Employer, the grievors made the choice to renounce their recall rights and to end their employment. To the extent that all of activating events [sic] deal with circumstances beyond the control of an employee, the specific circumstances that led to the termination of the grievors’ employment were entirely within their control. Having regard to the plain language in s. 74. (1) 2, there is no basis for concluding that the Employer was responsible for or played a role in the loss of the grievors’ employment.

46For these reasons, the Arbitrator dismissed the grievances. He did not deal with the issue of the timeliness of Mr. Johnson’s grievance.

Standard of Review

47In its factum the Union argued that the Arbitrator’s interpretation and application of the PBA should attract no deference by a reviewing court as it involved questions of pure pension law, which were outside the Arbitrator’s area of expertise. At the hearing, the Union abandoned this position and appropriately conceded that the standard of review to be applied by this Court to the Arbitrator’s decision was reasonableness.

48In Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, the Supreme Court provided updated guidance on the proper application of the reasonableness standard. According to Vavilov, “the reviewing court asks whether the decision bears the hallmarks of reasonableness – justification, transparency and intelligibility – and whether it is justified in relation to the relevant factual and legal constraints that bear on the decision” (para. 99). Those factual and legal constraints include the governing statutory scheme (paras. 108-110), other relevant statutory or common law (paras. 111-114), the principles of statutory interpretation (paras. 115-124), the evidence before the decision-maker (paras. 125-126), the submissions of the parties (paras. 127-128), the past practices and decisions of the administrative body (paras. 129-132), and the potential impact of the decision on the individual to whom it applies (paras. 133-135).

49The Supreme Court has repeatedly emphasized that a reviewing court cannot interfere with a decision because it would have decided the matter differently or because an alternative interpretation would have been open to the arbitrator (para. 83). The court also made it clear that reasons need not be perfect or comprehensive (paras. 91-92). The decision must be read:

…in light of the history and context of the proceedings in which they were rendered. For example, the reviewing court might consider the evidence before the decision maker, the submissions of the parties, publicly available policies or guidelines that informed the decision maker’s work, and past decisions of the relevant administrative body. This may explain an aspect of the decision maker’s reasoning process that is not apparent from the reasons themselves, or may reveal that an apparent shortcoming in the reasons is not, in fact, a failure of justification, intelligibility or transparency. Opposing parties may have made concessions that had obviated the need for the decision maker to adjudicate on a particular issue; the decision maker may have followed a well-established line of administrative case law that no party had challenged during the proceedings; or an individual decision maker may have adopted an interpretation set out in a public interpretive policy of the administrative body of which he or she is a member. [At para. 94]

50Reviewing courts must be satisfied that the decision under review does not contain a “fatal flaw” in its “overarching logic” and that “there is [a] line of analysis within the given reasons that could reasonably lead the tribunal from the evidence before it to the conclusion at it which it arrived” (para. 102). Decisions that contain a “fundamental gap” or that are based “on an unreasonable chain of analysis” cannot be sustained even if the outcome of the decision could be reasonable under different circumstances (para. 96).

Was the Arbitrator’s Decision Unreasonable?

51As adverted to above, decisions that contain a fundamental gap will not be sustained by a reviewing court under a reasonableness analysis. The Supreme Court makes this clear at para. 96 of Vavilov, which states:

Where, even if the reasons given by an administrative decision maker for a decision are read with sensitivity to the institutional setting and in light of the record, they contain a fundamental gap…, it is not ordinarily appropriate for the reviewing court to fashion its own reasons in order to buttress the administrative decision. Even if the outcome of the decision could be reasonable under different circumstances, it is not open to a reviewing court to disregard the flawed basis for a decision and substitute its own justification for the outcome. To allow a reviewing court to do so would be to allow an administrative decision maker to abdicate its responsibility to justify to the affected party, in a manner that is transparent and intelligible, the basis on which it arrived at a particular conclusion. This would also amount to adopting an approach to reasonableness review focused solely on the outcome of a decision, to the exclusion of the rationale for that decision. To the extent that cases such as Newfoundland Nurses and Alberta Teachers have been taken as suggesting otherwise, such a view is mistaken.

52As mentioned earlier, the Arbitrator’s decision does not advert to or discuss s. 4(2) of the Regulation. Is this gap fundamental?

53A gap is only fundamental if it could have affected the result. In the next section of these reasons I will be analyzing if the failure to address s. 4(2) of the Regulation could have affected the result. The section is not intended to dictate the result of any further arbitration of this matter.

54For ease of reference, s. 4(2) of the Regulation is reproduced below. It reads:

If an employer bound by a collective agreement is or will be laying off an employee for a period that will or may be longer than a temporary lay-off and the employer would be or might be in breach of the collective agreement if the employer advised the employee that his or her employment was to be terminated, the employer may provide the employee with a written notice of indefinite lay-off and the employer shall be deemed as of the date on which that notice was given to have provided the employee with a notice of termination.

55In this case the Employer was bound by a collective agreement and the Arbitrator found that what occurred at the Caledonia plant just before the layoff was “not inconsistent with a layoff that was expected to last for a lengthy period of time” and that “the layoff notices reference the possibility that the layoff could exceed 35 weeks”. Thus, two of the three preconditions for the application of the section apply. With respect to the third, whether the Employer “would be or might be in breach of the collective agreement if the employer advised the employee that his or her employment was to be terminated”, there was no discussion of this issue in the Arbitrator’s decision. Given the fact that the collective agreement provided for recall rights of up to three years from the date of layoff, it is certainly reasonable to believe that the Employer might be in breach of the collective agreement if it terminated the grievors. But a finding would have to be made on evidence.

56If the three preconditions are found to be satisfied, the employer may provide an employee with a written notice of indefinite layoff, which is what the Employer did in this case. Thus, applying s. 4(2) of the Regulation, the Employer may be deemed to have terminated the grievors as of the date on which the notice of indefinite layoff was given, not, as the Arbitrator found, on the date that the grievors gave up their recall rights and accepted their severance pay.

57This version of events is also consistent with para. 1(c) of the MOS that was negotiated to deal with “all pertinent matters arising from the indefinite curtailment” of the Caledonia plant. That section reads:

An employee who is indefinitely laid off by the Company and who accepts statutory severance pay shall, from and after the date of his termination or layoff, no longer be considered an employee of the Company.

58This section of the MOS provides that the grievors ceased to be employees of the company as of the date of their layoff, not as of the date that they accepted their severance package (as the Arbitrator found).

59Finally, the fact that the grievors were terminated when they were laid off as opposed to when they accepted their severance package is also consistent with what the Employer told them would happen if they chose to take option two and renounce their recall rights. As put by the Employer in writing, in that event they would “be deemed terminated under s. 56(1) of the ESA, 2000.” Under s. 56(1)(c) of the ESA, an employee is terminated if “the employer lays the employee off for a period longer than the period of a temporary lay-off.” In that event, by virtue of s. 56(5), the employee’s employment is “deemed to be terminated on the first day of the lay-off.”

60If the notices of indefinite layoff are considered to be layoff notices “for a period longer than the period of temporary lay-off” then the grievors were not on temporary layoff when they accepted their severance payments. In fact, employees who are on temporary layoff are normally not entitled to severance payments until their period of temporary layoff has expired. If the grievors were not on temporary layoff and were deemed terminated as of the date that they received their notices of indefinite layoff, then an activating event did occur and the grievors are entitled to grow in benefits.

61Section 4(2) of the Regulation is discussed in Victorian Order of Nurses, Durham Branch v. Ontario Nurses’ Assn. (Policy Grievance), [2004] O.L.A.A. No. 559. In Victorian Order of Nurses, the arbitrator dealt with a policy grievance that raised the issue of whether certain employees under a collective agreement, who had received layoff notices from their employer, were entitled to resign form their employment, thereby triggering their entitlement to severance pay. In that case all of the employees were provided with “notices of temporary lay-off”. However, at the time the notices were issued, the employer had lost a three-year contract that accounted for 80% of its revenue. The issue was whether the notices were actually notices of temporary layoff or, as the Union asserted, “poorly disguised ‘notices of indefinite layoff.’” If the notices were notices of temporary layoff then the employees had to remain on layoff for thirty-five weeks before they could claim their severance pay.

62In making her decision the arbitrator considered the provisions of the ESA dealing with termination and severance of employment, including s. 56 (the section detailing what constitutes termination and what constitutes a temporary layoff), ss. 63 and 64 (the sections dealing with what constitutes severance and entitlement to severance pay) and s. 67 (the section concerning the election re recall rights). She also considered the provisions of s. 4(2) of the Regulation as, according to the Union, all of the conditions of that section had been met and, therefore, all the affected employees should be deemed to have received notices of termination on the dates that they received their layoff notices.

63The arbitrator also considered the legislative evolution of the ESA. The current version of the ESA was enacted in 2000. The Regulation under the predecessor Act provided that “[n]otice of indefinite lay-off shall be deemed to be notice of termination of employment.” The arbitrator noted that the authorities decided under the previous scheme held that a notice of indefinite layoff included a notice without a precise recall date. Under the current scheme an “employer who lays an employee off without specifying a recall date shall not be considered to terminate the employment of the employee, unless the period of lay-off exceeds that of a temporary lay-off.”

64The arbitrator went on to discuss what role s. 4(2) plays in this scheme at paras. 43-51:

But what then does section 4(2) add or detract from the scheme envisioned by the statute?

First, I accept that the conditions precedent to the possibility of the issuance of a “written notice of indefinite lay-off” are present in this case. There was no issue that the employer was bound by a collective agreement and that it would or might have been in breach of that agreement had it simply terminated the affected employees rather than laying them off [because the collective agreement provided employees with recall rights for a period of up to one year following the layoff. In the case at bar, the collective agreement provided for recall rights of up to three years from the date of lay-off]. The employer, of course, disputed that the layoff “may” be longer than a temporary layoff. Had it chosen to specify a recall date within the period of permissible temporary layoff, the employer’s position might have been unanswerable on this point (something the union all but conceded). However, having failed to do so and in view of the objective circumstances attending the layoffs (ie. the loss of a substantial source of the employer’s business) and having regard to the statutory use of the conditional tense, I have little difficulty in concluding that the layoffs may be for a period longer than a temporary layoff and that the conditions precedent to the issuance of a written notice of indefinite layoff (and the resulting deemed notice of termination) are thereby established.

Thus, I am satisfied that, if the employer in this case provided the affected employees with a written notice of indefinite layoff, it was deemed to have been a notice of termination.

This brings me to the exercise of characterization identified at the outset: were the layoff notices in this case notices of temporary layoff or notices of indefinite layoff?

The notices themselves clearly purport to be notices of temporary layoff. And though there was no further evidence on the point, that employer declaration is likely, in and of itself, sufficient to warrant the conclusion that the employer’s subjective intention was to elect temporary layoffs. Were the case to be decided under the predecessor Act, however, the jurisprudence (both administrative and judicial) suggests that restricting the analysis to a determination of the employer’s subjective intention might be misguided. An objective analysis of the nature of the layoff notices (the lack of recall date, the disappearance of much of the employer’s business) certainly supports the conclusion that the layoffs are indefinite. But the Legislature must be taken to have known and understood that legal context when it introduced a new Act and revised the relevant provisions. By replacing the former identity between notice of indefinite layoff and notice of termination and introducing a scheme whereby layoffs without recall dates do not amount to termination unless and until the permissible period of temporary layoff has elapsed, the Legislature must be seen to have embarked on a dramatic departure.

This brings me, once again, to the impact and to the purpose of section 4(2) of the Regulation. In my view, the fact that an indefinite layoff is something that the employer may issue is critical to an understanding and interpretation of the section. This may be seen to effectively re-introduce and revive the significance of the employer’s intention in the operation of the section. It would be more accurate, however, rather than focusing specifically on employer intention, to observe that the critical element in the application of the Regulation is the issuance of a written notice of indefinite layoff. The employer, assuming the conditions precedent are satisfied, may or may not choose to issue such a notice. There is no requirement that it be issued. It is either issued or it is not - at the employer’s prerogative. It is only if and when such a notice is issued that the affected employees can then choose to resign and thereby effect their own severance under section 63(1)(e) which, in turn, gives rise to the possible election under section 67.

In other words, the Regulation revives the former identity between notice of indefinite layoff and notice of termination (an identity which is otherwise at odds with the new statutory scheme) but does so only for the very limited purpose of enabling the employer, should it so choose and notwithstanding the provisions of the collective agreement, to issue a notice of indefinite layoff. The employees’ consequent rights depend on the employer’s exercise of its option.

Under the provisions of the Act, the default position in the collective bargaining context with respect to a layoff notice devoid of a recall date is that it is a notice of temporary layoff and remains as such unless and until the period for a temporary layoff has expired. Indeed, as we have seen, the Act explicitly declares that notice of a layoff with no fixed recall date does not constitute notice of termination. One might be forgiven some consternation at any attempt to square that provision of the Act with a provision of the Regulation which indicates, that in certain limited circumstances, a notice of indefinite layoff is deemed to be a notice of termination.

But in my view, Section 4(2) of the Regulation provides the employer with an option to manage things differently. Should it prefer, for example, to terminate, or at least provide an immediate notice of termination to its employees in order to, for example, generate clarity around which employees may choose to abandon their recall rights, it may opt to issue indefinite lay-off notices which are deemed to be notices of termination and, in turn, lead to employees’ elections. The employer is permitted to do this notwithstanding the fact that immediate terminations, or at least notices thereof, would or might otherwise be contrary to the terms of the collective agreement and notwithstanding the fact that, as a general proposition, layoff notices without recall dates are not to be construed as notices of termination. It is, however, an option conferred by the Regulation on the employer. (Of course, if the employee chooses to exercise it, the affected employee will, in turn, have access to their right to elect between recall rights and severance pay.)

65The arbitrator found, in the case before her, that the employer’s intention was not to issue a notice of indefinite layoff. Critical to her finding was the fact that the employer described the notices as notices of “temporary layoff”.

66In the case at bar, the Employer did the opposite. It described the notices as notices of “indefinite layoff” and it is quite clear from the documentation it executed and sent that this decision was related to dealing with the grievors’ recall rights under the collective agreement. On the facts of the case at bar, the arbitrator in Victorian Order of Nurses would very likely have found that the grievors were terminated when they received their notices of indefinite layoff based on s. 4(2) of the Regulation. This illustrates that if the Arbitrator whose decision we are reviewing had considered s. 4(2) he might have come to a different conclusion. Thus, the gap in his reasoning may have affected the result, which, in turn, makes it a “fundamental gap” within the meaning of Vavilov.

67Before this court, the Employer disputed that s. 4(2) had any application to the case at bar. It did so based on its reading of the section, a reading that did not accord with the clear meaning of the section. It also disputed that one of the necessary preconditions applied, namely, that the employer might be in breach of the collective agreement if the employer advised the employee that his or her employment was to be terminated. I have already dealt with this submission and found that, based on the existence of the recall rights in the collective agreement at issue, one could reasonably find that this precondition was met.

68The Employer also pointed to the case of Bonner v. Ontario (Superintendent Financial Services), 2017 ONFST 13, a decision of the Financial Services Tribunal that the Arbitrator relied on in support of his decision. I agree that this case provides support for the Arbitrator’s decision, but it fails to satisfy me that the Arbitrator’s decision should be upheld as reasonable since it too fails to consider s. 4(2) of the Regulation.

69For these reasons, I find that the Arbitrator’s decision is unreasonable and should be set aside.

Remedy

70In Vavilov the Supreme Court addressed the issue of a court’s remedial discretion on judicial review at paragraphs139-42. It began by noting that inherent in the application of the reasonableness standard is the recognition by the court that the legislature has chosen to entrust the matter under review to an administrative tribunal. Thus, “where a decision reviewed by applying the reasonableness standard cannot be upheld, it will most often be appropriate to remit the matter to the decision maker to have it reconsider the decision, this time with the benefit of the court’s reasons” (para. 141). This is particularly true where the decision maker has not had a “genuine opportunity to weigh in on the issue in question” (para. 142).

71Weighed against this are “concerns related to the proper administration of the justice system”, in particular, the need to ensure access to justice, a concept that includes efficient, timely and cost-effective decision-making. As noted by Vavilov, it is this goal that has often motivated legislatures to create specialized administrative tribunals (para. 140).

72In the case at bar, the Union has urged this Court to exercise its discretion not to remit the matter to the original decision-maker. In doing so, it notes that the grievances were filed in 2014 and 2016, that the Arbitrator heard the grievance towards the end of 2016 and that he did not issue his decision until December of 2018, two years later. During this period the grievors have been receiving a much reduced pension.

73I agree with the Union that there is a real concern about delay in this case. However, balanced against this is the fact that a specialized decision-maker has not had an opportunity to consider the application of s. 4(2) of the Regulation to the facts of this case. Furthermore, there is an issue concerning the timeliness of one of the grievances that the Arbitrator did not decide. Finally, the prejudice that the grievors have suffered as a result of the delay is a prejudice that can be compensated for by a retroactive order in the event that their grievances are ultimately successful.

74In my view, the appropriate way to balance the competing interests in this case is to remit the matter to a different arbitrator for a full hearing on the merits of the grievances (including Mr. Johnson’s grievance) in accordance with the reasons of this panel. The new arbitrator will not be bound by the factual findings of the previous arbitrator. I am remitting the matter to a different arbitrator because the Arbitrator took two years to render his decision, a delay that is unacceptable in any context, let alone a context where specialized decision making was put in place to render efficient and timely justice.

Conclusion

75For these reasons the Arbitrator’s decision is set aside, and the matter remitted to be heard by a different arbitrator. Pursuant to the agreement of the parties the Union is entitled to its costs fixed in the amount of $8,000, all inclusive.

H. Sachs J.

I agree _______________________________

Ellies R.S.J.

I agree _______________________________

Favreau J.

Released: April 16, 2020

CITATION: United Steel v. Georgia-Pacific LP, 2020 ONSC 1560

DIVISIONAL COURT FILE NO.: DC-0011