Knauth v. The Independent Electricity System Operator et al., 2026 ONSC 2769

DIVISIONAL COURT FILE NO.: DC-25-00000621-00JR

DATE: 20260513

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT

RE: MAYA KNAUTH, Applicant

AND:

INDEPENDENT ELECTRICITY SYSTEM OPERATOR AND THE SOCIETY OF UNITED PROFESSIONALS AND ARBITRATOR JOHN STOUT, Respondents

BEFORE: ACJ McWatt, Shore, Brownstone JJ.

COUNSEL: Self Represented, for the applicant

Josh Hoffman, for the Respondent Independent Electricity System Operator

Nora Parker, for the Respondent Society of United Professionals and Arbitrator John Stout

HEARD: April 16, 2026

ENDORSEMENT

[1] This is a judicial review of a decision by labour arbitrator Stout (the “Arbitrator”) on June 25, 2025, that found Ms. Knauth had violated the terms of a Termination Agreement (the “Agreement”) with her former employer, the Independent Electricity System Operator (“IESO”), entered on March 29, 2011. The Agreement contained a provision prohibiting Ms. Knauth from commencing claims against the employer related to her termination, which the Arbitrator found she violated when she commenced an Unfair Labour Practice (“ULP”) claim with the Ontario Labour Relations Board (“OLRB”).

[2] Ms. Knauth contests the jurisdiction of the Arbitrator to hear the dispute, and claims that the Agreement is unenforceable because, among other things, it contracts out of severance pay to which she is statutorily entitled, and because she was pressured to accept it by the IESO and her union. She requests that the Arbitrator’s decision be quashed and that the Agreement be declared void ab initio.

[3] The IESO argues that the Arbitrator did have jurisdiction to hear the matter, and his decision was both reasonable and correct. The IESO requests that the decision be upheld and that the court affirm that Ms. Knauth is required to repay the money she received through the Agreement.

Background

[4] The IESO is the Ontario Hydro entity responsible for controlling Ontario’s bulk electricity system. Their employees are mostly unionized through the Society of United Professionals (“the Society”). Ms. Knauth was a unionized employee with IESO from July 2001 until March 31, 2011. In 2009, she made several allegations against two fellow Union members, accusing them of harassment, bullying and discrimination. She filed a grievance in 2010 and one of the other employees filed a grievance claiming that Ms. Knauth was harassing him. She also filed a Human Rights Tribunal of Ontario (“HRTO”) complaint. A third-party investigation found that her claims were not substantiated but that her behaviour toward the other employee constituted harassment. As a result, the Society did not pursue her grievance.

[5] In January 2011, Ms. Knauth went on sick leave. In February 2011, at Ms. Knauth’s request, the Society approached the IESO about an “exit package.” The IESO made it clear that they would be happy to have her back to work when she was ready, but she claimed that she had been constructively dismissed. On March 29, 2011, Ms. Knauth signed the Termination Agreement and Release stating that she “irrevocably resigned from her employment with the IESO”. She was paid $50,000 related to employment and $20,000 as damages for her allegations of harassment and discrimination. In exchange she agreed to withdraw her HRTO claim.

[6] The Agreement also contained a clause that would require Ms. Knauth to repay the $70,000 if she commenced a claim against the IESO related to her employment or resignation. She is now claiming that she was coerced into signing the Agreement, and that she expected to be paid severance on top of the $70,000, which she is referring to as “hush money.” She also argues that the $50,000 portion classified as employment related should not have been taxed.

[7] On October 4, 2024, the applicant filed the ULP complaint alleging that the Agreement was unlawful. On January 7, 2025, the complaint was dismissed for delay and a finding by the OLRB that she had not made out a prima facie case.

[8] On February 17, 2025, Ms. Knauth filed a new HRTO application repeating the allegations from the ULP. That application was dismissed on September 26. 2025. The applicant brought a separate Divisional Court application for Judicial Review of that decision (File# DC-25-00000888-0000). It was heard on the same day as this Application and was dismissed by this panel, along with this decision, on today’s date.

[9] In response to Ms. Knauth’s filing her ULP, the IESO filed a Grievance alleging a breach of the Termination Agreement and seeking repayment. That Grievance was heard before arbitrator, John Stout, on May 13, 2025.

The Arbitration Decision

[10] The Arbitrator first found that he had jurisdiction over the dispute, as its subject matter was the Agreement, which was negotiated between the IESO and the Society, under the Society’s exclusive bargaining role in the collective agreement. Therefore, under the Labour Relations Act, 1995 (“LRA”) and the Supreme Court of Canada direction from Weber v. Ontario Hydro, [1995] 2 SCC 929 at pars 66 and 67, where the essential character of the dispute is the interpretation, application and administration or violation of a collective agreement, the jurisdiction to resolve the dispute lies with a labour arbitrator.

[11] The Arbitrator then went on to find that Ms. Knauth resigned voluntarily; she was not constructively dismissed; she was not entitled to severance pay; the Agreement was not a non-disclosure agreement and the payments she did receive were not “hush money”.

[12] He found the Society represented Ms. Knauth fairly, and the payments were lawfully and appropriately divided between human rights damages and retirement allowance.

[13] The Arbitrator concluded that Ms. Knauth had violated the Agreement by starting the ULP litigation and therefore triggered the repayment provision. Finally, the Arbitrator rejected Ms. Knauth’s claims that the Agreement and its enforcement violated her Charter rights. He ordered Ms. Knauth to pay IESO $70,000 less applicable statutory deductions plus legal costs.

ISSUES

[14] The Society raises the preliminary issue that Ms. Knauth does not have standing to apply for judicial review of a labour arbitrator’s decision because the jurisdiction for labour arbitration comes from the collective agreement, to which Ms. Knauth is not now a party. Therefore, the Society requests that the court decline to hear the application for judicial review, or in the alternative, the Society supports the submissions of the IESO.

The issues on the judicial review, in addition to the preliminary issue of standing, are:

1. Whether the Arbitrator had jurisdiction to hear the IESO’s grievance;
2. Whether the Arbitrator’s decision is unreasonable because he fundamentally misapprehended the evidence in characterizing the Termination Agreement;
3. Whether the Termination Agreement was invalid because the applicant was coerced to sign it, did not have the mental capacity to enter it, the Agreement contained unlawful terms and conditions and she was constructively dismissed; and
4. Whether the Arbitrator raised a reasonable apprehension of bias.

COURT’S JURISDICTION

[15] The Court has jurisdiction to hear this application pursuant to ss. 2 and 6(1) of the Judicial Review Procedure Act, R.S.O. 1990, c. J.1.

STANDARD OF REVIEW

[16] None of the parties question the standards of review in this case. The presumptive standard of review for all questions on judicial review is reasonableness, per Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65.

[17] The question of whether the arbitrator has jurisdiction over the dispute attracts correctness review because it engages the question of jurisdictional boundaries between administrative bodies (Vavilov, at para. 63).

[18] The application of the Charter also requires a correctness review because it raises a constitutional question (Vavilov, at para. 55).

[19] Other issues raised by the applicant regarding the Arbitrator’s assessment of the evidence and applicable legal principles remain on a reasonableness standard.

[20] With respect to procedural fairness including reasonable apprehension of bias, there is no standard of review (Afolabi v. Law Society of Ontario, 2025 ONCA 257, at para 60). The Divisional Court must determine whether the requisite level of procedural fairness was granted by applying the factors set out in Baker v. Canada (Minister of Citizenship and Immigration), 1999 699 (SCC), [1999] 2 S.C.R. 817.

The Applicant Does Not Have Standing

[21] In Canadian labour relations, the only parties to a collective agreement are the Society and the employer (Nöel v Société d’énergie de la Baie James, 2001 SCC 39, [2001] 2 SCR 207, at para 42; Yee v Trent University, 2010 ONSC 3307, at para 6). In unionized workplaces, employers cannot bargain individually with employees because the Society is the exclusive bargaining agent of its members (Noel at paras 41-42; Yee, at para 6; Ali v United Food and Commercial Workers Canada, Local 175, 2014 ONSC 7318, at para 4).

[22] As the exclusive bargaining agent, a union controls the grievance and arbitration process unless there is clear language to the contrary in the collective agreement. Because of the Society’s exclusive oversight of the grievance process, employees generally do not have standing to seek judicial review of an arbitration award where the Society has decided not to do so (Nöel, at para 69).

[23] This Court has recognized three exceptional circumstances in which an individual employee might have standing to pursue an application for judicial review independent of their union. The applicant meets none of the exceptional circumstances.

i. There is no language in the collective agreement which confers a right on the applicant to bring an application for judicial review

[24] The collective agreement between the Society and the IESO does not contain any language permitting individual members to have carriage of grievances or to bring applications for judicial review. Article 15.2 of the collective agreement sets out the definitions of an employee complaint, employee grievance, group grievance, policy grievance, and company grievance. Even an employee complaint is one that must be filed by a Society Local Vice-President, Unit Director, or Delegate.

[25] The Arbitrator included the applicant’s name in the style of cause of his decision as a naming convention reflecting the unique circumstances of the case. But the collective agreement recognizes the Society as the exclusive bargaining agent of its members employed by the IESO. And being a party to a settlement is not the same as having standing in a grievance or standing to bring an application for judicial review. While the applicant was party to the Agreement and was required to sign it to obtain the settlement funds, she did not have standing in the subsequent grievance which arose from the collective bargaining relationship between the Society and the IESO.

ii. The Society did not take a position adverse in interest to the applicant

[26] The Society did not take an adverse position to that of the applicant in the grievance. In fact, at the hearing, the Society did not take a position on the merits. That is not the same as taking a position adverse in interest. The Society did not make submissions in support of the IESO’s position or concede the grievance. It asserted that it had abided by its duty of fair representation owed to the applicant. The only relevant issue in the grievance the Society did take a position on was in support of the applicant that the Charter applied to the IESO, which the Arbitrator accepted.

[27] The applicant was informed of the grievance and the date of the hearing. She attended the hearing and was permitted the opportunity to present evidence with the Society assuring her the opportunity to make fulsome submissions in her own defence. In fact, the applicant was allowed to make two additional written submissions following her initial written submissions of May 12, 2025, and oral submissions at the hearing.

[28] The fact that the financial stakes are high for the applicant in this case does not affect the analysis for determining standing (Yashin v National Hockey League, 2000 22620 (ON SC), at para 22).

[29] The Society could not have been characterized as an “opponent” during the Arbitration or having been in “fundamental conflict with the employee’s core interest” (Themelis v Toronto, 2021 ONSC 250, at para 18). The second exceptional circumstance does not apply.

iii. The Society’s representation of the applicant was not deficient

[30] The Society’s representation of the applicant was not so deficient that she must be granted standing. The applicant had not been employed by the IESO or a member of the Society’s bargaining unit at the IESO for over 13 years. Yet, the Society advocated for Ms. Knauth to make her own submissions and, as a result, she was able to make every argument she wished to make. As already set out, the Society also supported the applicant on her Charter submissions, which the Arbitrator accepted. This case does not fall into the third exception.

[31] The applicant does not have standing in this Application and it should be dismissed for that reason alone.

The Judicial Review

[32] I will deal with the issues in the judicial review despite my findings that the applicant does not have standing to bring one. And, I have concluded that the Arbitrator’s decision was reasonable and correct.

The Arbitrator had exclusive jurisdiction to enforce the Termination Agreement

[33] The Arbitrator had exclusive jurisdiction to enforce the Agreement. As set out by the Supreme Court of Canada in Weber, an arbitrator has exclusive jurisdiction when the dispute, in its essential character, arises from the interpretation, application, administration, or alleged violation of the collective agreement. Section 48(1) of the LRA requires that every collective agreement provide for the final and binding settlement of all differences between the parties to a collective agreement. An arbitrator also has the power to interpret and apply human rights and other employment related statutes, despite any conflict between those statutes and the terms of the collective agreement (ss.48(12)(j) of the LRA).

[34] The Arbitrator relied on the case of Donovan v. WRPSB and Larkin, 2021 ONSC 2885, for his jurisdiction. He found that:(1) the applicant was an employee of the IESO and a member of the Society at the time of the Agreement; (2) under the collective agreement, the Society had the exclusive right to represent bargaining unit members, including the applicant at the time of the Termination Agreement; (3) the subject matter of the Termination Agreement was the cessation of the applicant’s employment with the IESO; (4) the Termination Agreement resolved any and all disputes the applicant had under the collective agreement, and such disputes would be subject to the grievance and arbitration provisions of the collective agreement; (5) the applicant was represented by the Society during the negotiations leading to the Termination Agreement; and (6) the IESO, the Society, and Ms. Knauth were all parties to the Termination Agreement.

[35] The Arbitrator correctly decided that the Agreement was negotiated and executed “within the ambit” of the collective agreement. The Agreement contained numerous references to both the collective agreement (that she was paid pursuant to the provisions of it) and communications with the Society (that she was “represented fairly by the Society throughout”). These references were support for the Arbitrator to find that the matter fell within his jurisdiction. He also found that the full and final release signed by Ms. Knauth indicating that “the Releasees have complied with the collective agreement in respect of my employment and/or the termination of such employment” was further support for that finding.

[36] The applicant has provided no authority for her complaint that the Arbitrator did not have jurisdiction to enforce the Agreement because it did not resolve a grievance and instead resolved an HRTO complaint. She relied on section 48(15) of the LRA which states that “An arbitrator or the chair of an arbitration or the chair of an arbitration board, as the case may be, may enforce the written settlement of a grievance”. While section 48(15) of the LRA authorizes an arbitrator to enforce the written settlement of a grievance, it does not preclude an arbitrator from enforcing a settlement that does not specifically address a grievance. The proper test is whether the matter falls within the ambit or essential character of the collective agreement, which I have found it did. In the Donovan case, an arbitrator was found to have jurisdiction to enforce the settlement agreement in that matter, despite the fact that it, among other things, resolved an ongoing HRTO complaint and not a grievance.

The Decision was Lawful, Accurately Assessed the Evidence, and was Procedurally Fair

[37] The applicant raises several arguments challenging the validity of the Agreement and contends that it should be set aside on the basis that, among other things, the Arbitrator allegedly misapprehended the evidence, failed to apply relevant case law, and demonstrated bias.

The Arbitrator did not misapprehend the evidence

[38] The applicant submits that the Arbitrator failed to consider the evidence that she did not have the mental capacity to enter into the Agreement. She provided a letter from her doctor, dated May 9, 2013, which reported that she suffered from post-traumatic stress disorder and a major depressive disorder. The Arbitrator correctly found that the letter did not support a finding that the applicant lacked the mental capacity to understand the terms of the Agreement or that she lacked the capacity to manage her owns affairs. The letter also post-dated the signing of the 2011 Agreement by two years. It was open to the Arbitrator to conclude that she freely and voluntarily entered into the Agreement, especially considering the evidence at the hearing of numerous emails between the applicant and the Society representative from 2010 and 2011 showing that she understood the terms of the Agreement and readily accepted them.

[39] The applicant raised several arguments alleging that the Society, together with the IESO, coerced or misled her into signing the Agreement. She also contended that the Arbitrator failed to consider emails she sent to the investigator regarding alleged flaws in the workplace investigation and she argues that the Society should have filed a grievance or requested a second investigation. However, she provided no evidence of any flaws in the workplace investigation.

The Arbitrator did not misapply the law

[40] The applicant maintains the Arbitrator’s misapplied the law. First, the Arbitrator did not misapply the law when he found that the applicant was not constructively dismissed. He considered the evidence that showed the applicant voluntarily resigned from her employment. He found that she expressly agreed that she “irrevocably resigned from her employment with the IESO” as set out in the Agreement. He relied on her email communications to the Society. He reasonably concluded that the facts did not support a constructive dismissal because the applicant freely signed the Agreement, which expressly referenced her voluntary resignation and resolved all complaints in exchange for the monetary payment. These are findings of fact to which the Arbitrator is owed significant deference.

[41] Second, the applicant argued that the Agreement was unlawful because it does not provide her with severance payments under the collective agreement. This argument was rejected by the Arbitrator, who found that she was not entitled to severance pay because she voluntarily resigned from her employment. In consideration for her resignation, she received $70,000 (less applicable deductions) from the IESO and agreed not to pursue any further claims against the company. The Arbitrator also found the IESO did not terminate the applicant, and she was not a surplus employee, therefore, she was not entitled to severance pay under the collective agreement or otherwise. These findings are both reasonable and correct and should be afforded significant deference. The applicant has not provided any basis at law or in fact to warrant overturning his findings.

[42] Third, the applicant argues that the Agreement is unenforceable because the money paid to her was “hush money” in exchange for signing a confidentiality clause. The Arbitrator found that, while the Agreement contained a mutual confidentiality clause, it applied only to the terms of the Agreement and that such clauses are common in settlements of that kind. There is no evidence or jurisprudence to support the proposition that the payments provided to the applicant were illegal or improper “hush money”.

[43] Fourth, the applicant argued that the $50,000 payment was mischaracterized as a retiring amount but was in fact “an agreed amount to avoid litigation” rather than for the purpose of compensating her for loss of employment. As a result, it was unlawful. The Arbitrator properly rejected this proposition and found the payments to the applicant were properly segregated: $50,000 relating to her employment with the IESO (taxable), which the Canada Revenue Agency (“CRA”) defines as a retiring allowance, and $20,000 (non-taxable) as general damages for her HRTO claim under the Code. The Arbitrator explained that a retiring allowance is an amount paid to an employee in respect of loss of employment. He found that negotiating a retiring allowance for a departing employee was not unusual in these circumstances and that the $50,000 paid to the applicant was correctly characterized as such. The IESO was, then, legally required to deduct income taxes and remit them to the CRA on the applicant’s behalf. The Arbitrator relied on section 248(1) of the Income Tax Act, which sets out that a retiring allowance may be paid in respect of a “loss of employment,” - a voluntary resignation, in this case.

The Decision was procedurally fair and free from bias

[44] The applicant advanced a series of allegations that the Arbitrator’s decision was biased. She asserted that the Arbitrator was biased because he is male and therefore incapable of understanding the emotional or physical impact of sexual harassment on a woman. The applicant offered no evidence that she had been sexually harassed at any stage of the proceedings leading to the Arbitration. The applicant did not object to the gender of the Arbitrator until after his decision was rendered.

[45] The applicant alleged that, at the arbitration hearing of May 13, 2025, she overheard the IESO instructing the Arbitrator to “make sure their grievance goes through” and to “throw the book at her”. These allegations are unsupported by evidence and do not form part of the evidentiary record in this Application for judicial review.

[46] The applicant claims that the Arbitrator was biased because he was “selected and paid for by the IESO” and she was “forced” to attend the arbitration. There is no evidence about payment for the arbitration, but it is common practice for an employer and union to equally share the costs of an arbitrator for a grievance, since they were the only parties with statutory authority to select an arbitrator pursuant to section 48(2) of the LRA. The Arbitrator was selected by the IESO and the Society (the applicant’s exclusive bargaining agent) pursuant to the established process under the collective agreement. The applicant did not object to the appointment of the Arbitrator, and she voluntarily attended the arbitration hearing of May 13, 2025, as she was facing a default judgment of $70,000.

[47] The Arbitration hearing was procedurally fair and entirely free from bias. It was supported by evidence, addressed the issues raised by the parties in considerable detail and was consistent with well-established jurisprudence. The Arbitrator granted the applicant three weeks after the hearing concluded to file additional submissions and provide additional documents. The applicant filed those submissions on June 3, 2025. The Arbitrator also allowed the applicant to provide written legal submissions in connection with her Charter argument, which were filed on May 27, 2025. The test for establishing a reasonable apprehension of bias by an arbitrator is objective. There is a strong presumption of impartiality, and there will be a finding of reasonable apprehension of bias only where, from the perspective of a fair-minded, informed, and objective observer, the circumstances justify that conclusion. The applicant has not established that threshold by any evidence proffered in this matter.

The Charter has no applicability in the circumstances

[48] Finally, the applicant asserts that the Agreement contravenes the Charter and is therefore null and void. The applicant has not particularized this ground by referring to any sections of the Charter. The IESO does not admit that it is subject to the Charter, pursuant to section 32, asserting that it is not a government entity. In any event, the Arbitrator considered the applicant’s submissions on this issue and concluded that the Agreement does not infringe any of the applicant’s Charter rights. He concluded that freedom of contract is of central importance to the legal system and the applicant, the Society, and the IESO voluntarily entered into the Agreement, including the consequences for breaching it. The Arbitrator also concluded that confidentiality clauses and releases are standard features of settlement agreements and do not violate the Charter. I agree.

DISPOSITION

[49] For all these reasons, the Application is dismissed.

COSTS

[50] The parties have agreed that, because of the success of the IESO and the Society, the applicant shall pay each of them $2500 in all-inclusive costs.

ACJ F.E. McWatt

Justice S. Shore

Justice L. Brownstone

Released: May 13, 2026