International Union of Elevator Constructors, Local #50 v. Beckett Elevator Company Limited, 1983 CanLII 960

[1983] OLRB Rep. September 1391

2026-81-M International Union of Elevator Constructors, Local #50, Applicant, v. Beckett Elevator Company Limited, Respondent, v. National Elevator and Escalator Association, Intervener

BEFORE: R. O. MacDowell, Vice-Chairman, and Board Members J. Kennedy and F. W. Murray.

APPEARANCES: B. Chercover, B. Morran and B. Shanks for the applicant; W J. Mc­Naughton and A. Hopkirk for the respondent; A. Reistetter for the intervener.

DECISION OF THE BOARD; September 23. 1983

I

1. This is a referral of a grievance to arbitration pursuant to section 124 of the Labour Relations Act. The referral was filed on December 17, 1981, adjourned on the consent of the parties, and eventually came on for a hearing before the Board on February 22, 1982. At that hearing the parties made a number of submissions which are more fully set out and dealt with in two Board decisions dated September 21, 1982 and March 17, 1983. Those matters need not be referred to here. It suffices to say that for the reasons set out in those earlier Board decisions, the Board determined that it would hear the union's grievance on its merits. A hear­ing for this purpose was held on July 6, 1983.

2. The grievance involves the so-called industry-wide "bumping" provisions of a provincial agreement binding the complainant union, and the respondent Beckett.

[Review of collective agreement provisions and evidence omitted]

8. On the basis of the totality of the evidence before the Board, we find that Beckett was in breach of Article 10.15 of the collective agreement when it failed to hire the seven individuals referred to it by the union on October 1st, 1981. We find, therefore, that those individuals are entitled to compensation for the wages and benefits lost by reason of Beckett's breach of the collective agreement.

9. A final issue which must be determined is whether the compensation award should also include an interest component to reflect the fact that the grievors have been denied the use of monies which should have been paid to them in October, 1981 if the terms of the agreement had been complied with. The union asserts that the Board should take the same approach as it does in unfair labour practice cases where interest is routinely awarded (see: Hallowell House Limited, [19801 OLRB Rep. Jan. 35, and see also Practice Note 13 of Sep­tember 8, 1980). It argues that the employees have been deprived of their lost wages for more than a year and a half, and that interest is necessary to put them in the position that they would have been in had the employer complied with its contractual obligations. Beckett argues that the Board has no jurisdiction to award interest because such award would be penal in effect and not merely compensatory. Beckett also argued that there should not be any award of interest where there is a bona fide dispute as to the interpretation or application of the agreement. Finally, Beckett argued that the notion of interest is based upon an erroneous as­sumption that employees would invest the money which they receive in wages. It is submitted that this is most unlikely to be the case. Even if the employees have been "out of pocket" for a year and a half, Beckett argues that no compensation is properly attributable to this delay in payment.

II

10. This is not the first time that the Labour Relations Board has been called upon in a section 124 proceeding to make a compensation award which includes an interest compo­nent. Interest has been awarded in: Caroll Electric (1982) Limited, 1 19831 OLRB Rep. Aug. 1282; Vanbots Construction, 119821 OLRB Rep. July 1086; Proweld Company Limited, [1982] OLRB Rep. March 437; and, White and Greer Company Limited, Board File 1404-81-M, de­cision dated March 23, 1981, (unreported). However, since this issue has recently been the subject of some arbitral debate (see, for example, the contrasting opinions expressed in Re Keeprite Inc. and Keeprite Workers' Independent Union (1982), 1982 CanLII 5060 (ON LA), 8 L.A.C. (3d) 35 (MacLaren) and Re Air Canada and Canadian Air Line Employees' Association (1981), 1981 CanLII 4426 (CA LA), 29 L.A.C. (2d) 142), it may be useful to briefly set out our own views on the propriety of an award of this kind.

11. We may be begin by observing that, like most collective agreements, the present one does not address the remedial authority of the arbitrator at all. It merely provides (as section 44 of the Labour Relations Act requires) that the arbitrator is to render a "final and binding" decision on the matters submitted to him for adjudication. The remedial content of those words is unspecified. Once an arbitrator has found a breach of the collective agreement, there is no guidance in the agreement itself as to what, if anything, should be done about it, other than the general injunction that he cannot "add to", "subtract from", or "modify" the substantive terms. Similarly, under section 124 of the Labour Relations Act, there is no elab­oration of what remedies are available to the Labour Relations Board to rectify particular breaches of the construction industry collective agreements to which that section applies. Once again, the Board is merely directed to render a final and binding determination.

12. But this rather sparse delineation of the Board's (or an arbitrator's) remedial au­thority does not mean that it is limited to what the parties have expressly spelled out in their collective agreement, nor is it necessarily defined by what a court or arbitrator might do in a common law or commercial context. For example, the fact that a court would not direct reinstatement in a wrongful dismissal action, does not mean that a labour arbitrator cannot direct reinstatement of an employee unjustly discharged, even if the collective agreement does not expressly say so. Arbitrators have been doing just that for more than 30 years. For the fact is that "a collective agreement is fundamentally different from an ordinary commercial contract or contract of employment.., and so common law concepts give way to the negotiated agreement and the jurisdiction of arbitrators to give final and binding decisions where dif­ferences arise between the parties..." — to borrow the words of Brook, J. A. in Blouin Dry­wall Contractors Limited v. United Brotherhood of Carpenters and Joiners of America, Local 2486, 75 CLLC ¶ 14,295. Common law approaches do not provide an unfailing guide to the administration of collective agreements and, in our view, it is wrong in principle to assume that the law of labour arbitration must necessarily conform to them (see McGavin Toastmaster Limited v. Ainscough et al., 75 CLLC ¶ 14,277 (S.C.C.)). Indeed, the Ontario Court of Ap­peal has even suggested, recently, that "while it may be helpful for arbitration boards to seek guidance by way of analogy from established legal procedures, they risk committing juris­dictional error by rigid adherence to them" (see Corporation of the City of Toronto v. Ca­nadian Union of Public Employees, Local 79, 82 CLLC ¶14,174 per Blair, J. A.).

13. Nor is the arbitration process established under sections 124, 44, or 45 of the Act totally analogous to a commercial arbitration. In particular, it cannot be said that this process is solely the creature of the parties' agreement or that they have opted for it as a matter of voluntary choice. The arbitration of grievances is a compulsory feature of modern labour leg­islation and reflects a legislative preference for this method of resolving disputes as an alter­native to industrial conflict which is typically prohibited during the currency of the collective agreement. Indeed, so pervasive is this concern that a "no-strike" and an arbitration provision must be part of every collective agreement or are deemed to be there (see sections 42 and 44(2)), the Labour Relations Board may rectify any arbitration provision which it considers inadequate, and sections 45 and 124 provide alternative arbitral forums to which either party may resort notwithstanding what they may have provided for in their collective agreement. In this context, it is somewhat misleading to focus on the quasi-contractual foundation of the ar­bitration process to the exclusion of the legislative framework of which it is a part, and a little artificial to speculate about what the parties must have intended, if they have done no more than echo the mandatory language of section 44.

14. This is not to say that an arbitrator has carte blanche to ignore the substantive terms of the collective agreement. Obviously he must respect the integrity of the bargain which the parties have made. To do otherwise, would negate an essential premise of our free collective bargaining system. An arbitrator cannot modify or add to the terms to which the parties have agreed. On the other hand~ an arbitrator has a statutory mandate to remedy breaches of the collective agreement (or, what amounts to much the same thing~ a mandate from the parties because of the language which they are required by statute to include in their agreement). In our view, in interpreting that mandate, he should be loathe to imply restrictions where there are none in the agreement — especially when, as in the present case, such approach would limit compensation for tangible and readily foreseeable losses. And, at the risk of belabouring the obvious, we reiterate that in determining what remedial response is necessary to effect a final and binding settlement of a grievance, an arbitrator must bear in mind not only what the parties have provided expressly in their collective agreement, but also the statutory policy underlying the arbitration process. When the Labour Relations Board is acting as arbitrator under section 124 of the Act, its mandate to "hear and determine" the question between the parties, and render a "final and binding" determination, involves similar considerations.

15. None of this is new of course. Since the seminal decision of Professor Bora Laskin (as he then was) in Re Oil, Chemical and Atomic Workers and Polymer Corp. Ltd. (1959), 10 L.A.C. 51, it has been clear that an arbitrator's remedial authority can arise either ex­pressly or by implication from the terms of a collective agreement. In Professor Laskin' s view (which was ultimately confirmed in the Supreme Court of Canada), the power to direct fi­nancial compensation arose from the contractual (and statutory) requirement to render a final and binding determination, even though the collective agreement contained no express power to award damages; moreover, in reaching this conclusion, he referred to the special role which arbitration must play in a collective bargaining process mandated by statute. So did McRuer, C.J.H.C., and Aylesworth, J.A., when the Polymer case was taken on judicial review. The implied authority to award damages was seen as a necessary implication or flowing from the statute.

16. The same general approach was taken by Lacourciere, J. (as he then was) in Re Samual Cooper and Co. Ltd. and International Ladies Garment Workers' Union et al. 1973 CanLII 461 (ON HCJDC), [1973] 2 O.R. 841. In that case the Divisional Court had to consider whether an arbitrator had the implied authority to make an order in the nature of a mandatory injunction. The applicant employer had argued that the arbitrator had no such jurisdiction and should not have made an affirmative direction in circumstances where a court would not have done so at common law. The Divisional Court disagreed. After referring to section 37(1) [now 44(1)] of the Act the Court observed:

It appears that the special tribunals created by unions and employers, and

directed by statute to bring about final and binding settlement of all dif­ferences, ought to have the necessary powers to achieve such results.

In our opinion the jurisdiction of the arbitrator was sufficiently wide

to encompass a full range of remedy, unless expressly limited by the La­bour Relations Act or the terms of the collective agreement. I can find no such limitation and the wording of s. 37(1) of the Act is such that the arbitrator was correct in this particular case in making the orders pro­vided.

The arbitrator's remedial authority was determined by reference to the Labour Relations Act which required the parties' agreement to include the terms which were before the arbitrator for consideration.

17. In Heustis v. New Brunswick Electric Power Commission, [1979] 1979 CanLII 26 (SCC), 2 S.C.R. 768, the Supreme Court of Canada has recently pointed out why the remedial powers of an arbitrator should be construed broadly:

There is a very good policy reason for judicial restraint in fettering adjudicators in the exercise of remedial powers. The whole purpose in establishing a system of grievance adjudication under the Act is to secure prompt, final, and binding settlement of disputes arising out of interpre­tation or application of the collective agreement, or disciplinary action taken by the employer, all to the end that industrial peace may be main­tained.

The significance of that observation, lies, once again, in its recognition that a full and re­sponsive range of remedial powers is the "indispensible complement" to a statutory scheme designed to achieve a satisfactory resolution of disputes which arise during the currency of a collective agreement.

18. If arbitrators are empowered to award compensation — as they clearly are following the Polymer decision — what should the purpose of such award be? Clearly, it should be to put the aggrieved party, so far as money can do (and perhaps subject to the limitations of reasonable foreseeability and mitigation), in the same position as he would have been in had there been no breach of the agreement. In Association of Radio and Television Employees of Canada (CUP-CLC) v. Canadian Broadcasting Corp., 1973 CanLII 182 (SCC), [1975] 1 S.C.R. 118, the Supreme Court of Canada put it this way:

The conclusion in [Polymer] was that although the awarding of dam­ages was not, in express terms, stated in the agreement as being a power of the board of arbitration, the loss sustained as a result of a breach of the agreement was a part of a "dispute" regarding an "alleged viola­tion" of the agreement.

The object of awarding damages for breach of contract is to put the injured party into the position in which he would have been had the con­tract been performed. What the board of arbitration sought to do in the Polymer case was to put the injured party into that position. Its authority to do so was found, implicitly, though not expressly, in the collective agreement.

19. The question in this case, then, is whether the aggrieved employees should be awarded not only the money they should have been paid in 1981 if the terms of the collective agreement had been honoured, but also some additional sum in recognition of the fact that, for almost two years now, the respondent has had the use of that money and the grievors have not. Such sum would be tantamount to an award of interest on the unpaid wages and would be necessary to fully compensate the aggrieved employees for what they have lost. Con­versely, any award which does not take into account the cost of money will result in less than complete recovery. However, in our view, there is little to recommend the latter result if there is a plausible interpretation of the agreement and section 124 which permits a more accurate and realistic measure of compensation. In this regard, we are attracted to the observations made by Seaton, J.A. in Re West Coast Transmission Co. Limited and Majestic Wiley Con­tractors Limited, (1982) 1982 CanLII 474 (BC CA), 139 D.L.R. (3d) 97 at p.101:

If the matter is at large and to be resolved as a question of policy, I would strongly favour permitting arbitrators to award interest. I can think of no valid reason why arbitrators deciding a claim should be powerless to grant a remedy that a judge hearing the same claim would be bound to grant. The claimant before the arbitrator would be severely prejudiced in this day of high interest rates. I can think of no good reason why the arbitrator should not be able to give him a complete remedy. An award in a commercial case that does not take into account the cost of money will not do justice between the parties because it will have disregarded a major cost of most enterprises.

For most arbitrations I would expect that the arbitrators could calculate an interest factor in arriving at "the loss suffered" or "the cost in­curred" or "an equitable adjustment" in price. The interest factor would not be interest upon the loss or cost or adjustment, but part of the loss or cost or adjustment, calculated at the time of the handing down of the award.

20. In West Coast Transmission, the British Columbia Court of Appeal concluded that a commercial arbitrator had the implied authority to award interest, even though the contract under consideration did not expressly so provide, and the Court Order Interest Act, R.S.B.C. 1979, c.76 did not apply to arbitrations. Of course, for the reasons we have already men­tioned, we do not suggest that an arbitrator under the Labour Relations Act is necessarily in the same position as a commercial arbitrator. Clearly he is not. However, in our view, the policy considerations similar to those expressed by Seaton, J.A. are equally applicable to the present proceeding.

21. Can a labour arbitrator's compensation award include an interest component of this kind? Many arbitrators have answered in the affirmative — at least in the absence of any pro­vision in the agreement limiting the arbitrator's authority. That was the conclusion of the Board of Arbitration in Air Cas founded on a much more general basis. The Board looked to the agreement not for any express power to include an amining the Polymer decision and the opin­ion expressed in Samuel Cooper, supra, the Board concluded that the power to award an in­terest component was part of its implied authority to compensate and "make whole" an aggrieved party. Interestingly, the Board could have relied on the terms of the collective agree­ment giving it the right to make a "just and equitable" decision and to grant a "monetary award"; however, the rationale for the decision was founded on a much more general basis.

The Board looked to the agreement not for any express power to include an interest com­ponent in the compensation award, but rather to see whether there was anything in the agree­ment to limit what would otherwise be the Board's implied authority to fashion an effective remedy. It rejected the suggestion that a limit on the arbitrator's remedial authority could be based upon past arbitral practice:

In light of the foregoing, subject to the terms of the collective agree­ment in each case, it would appear to be an appropriate time for boards of arbitration generally to give careful consideration to whether interest should be included in a damage award to redress breaches of a collective agreement to more truly put the aggrieved party into the position he would have been in had the collective agreement not been violated.

While it could be argued that the failure of arbitrators to award interest over many years has given rise to an expectation that unless it is ex­pressly provided for an arbitrator is without authority, I reject this ar­gument. In the first place the Supreme Court of Canada in Polymer, C.B.C. and Heustis, supra, and the Ontario Divisional Court in Re Sam­uel Cooper & Co. Ltd. and Int'l Ladies' Garment Workers' Union et al. (1973) 1973 CanLII 461 (ON HCJDC), 35 D.L.R. (3d) 501, [19731 2 O.R. 841, have concluded that un­less expressly limited, an arbitrator has full remedial authority, which would include interest in a given situation. Secondly, interest has seldom been requested. There is no series of cases in which arbitrators have de­cided either that they lack the authority to award interest or that interest is inappropriate as would give rise to the legitimate expectation that if not expressly provided for in the collective agreement the arbitrator is without the authority. In these circumstances it is difficult to infer that the absence of an express authority indicates that the parties did not in­tend to clothe an arbitrator with wide remedial authority, including the authority to award interest. Indeed, in my view, the properly held ex­pectation is that where an arbitrator has broad remedial authority to fash­ion a monetary remedy, as in this case, clear and precise language would be required to restrict his authority to award interest.

22. Since Air Canada, there have been a number of arbitration decisions in which back-pay awards have included an interest component. In Re McKellar General Hospital and Serv­ice Employees Union, Local 268 (1981), 1981 CanLII 4400 (ON LA), 30 L.A.C. (2d) 229 (Prichard), the arbitrator held that his backpay award should include an interest factor because he found the Air Canada reasoning to be "complete and compelling". Interest on wages owing was also awarded by Professor Palmer in Re Canadian Canners Ltd. and United Food and Commercial Workers, Local P596 (1982), 1982 CanLII 5114 (ON LA), 5 L.A.C. (3d) 130 with the following comment (at page 134):

There remains one question to deal with in this matter and that relates to the issue of interest on the money involved. As put forward by the union, essentially the company has retained the "earnings" of the grievor for a considerable period of time. Consequently, given the economic con­ditions of the country and the general cost of money, it was urged that this board should follow the developing arbitral pattern and order the company to pay interest on the basis of the "normal Ontario Relations Board formula". The company rejected this point on the basis that in the instant circumstances there was a genuine issue between the parties and that the company had not acted arbitrarily. Consequently, it was re­quested that we not exercise our discretion in this regard.

Having considered the matter, it is the view of the board that this is, in fact, an appropriate case for the issuance of interest on the claim by the grievor. On this point we would note that while the company might consider the issue to be one which was genuine, it would seem more ap­propriate in our opinion to characterize their position as "technical". Consequently, having put forward argument and failed, it seems to us inappropriate that Mr. Groot bear the loss of money that he should have received a long time ago.

And in an unreported award involving Toronto Western Hospital and C.U.P.E. Local 1744, arbitrator G. W. Dunn referred to section 38 of the Ontario Judicature Act, which allows interest in court actions. His language is reminiscent of that used by Seaton, J.A. in West Coast Transmission, supra:

Although section 38 has no application to arbitration boards constituted under a collective agreement, its passage nevertheless reflects public con­cern that consideration should be given to the award of interest in the assessment of damages. When a person discharged or suspended is de­nied recourse to the courts, the remedies available before a board of ar­bitration should not be patently less equitable.

23. Beckett argues that an award of interest would involve the imposition of an un­authorized "penalty". A similar submission prompted the following response from the Ontario Public Service Grievance Settlement Board:

Essentially, the rationale is one of compensation: an employee who has been deprived of funds because of an unjust discharge or suspension is deprived of the opportunity to use those funds. He may even be forced to borrow funds, which in these days of high interest rates is an expen­sive undertaking. In order to ensure that the employee is compensated because of his deprivation of funds, and is put in the position in which he would have been had he not been denied remuneration~ he must be given interest on the funds owing. Such an award is not to be regarded as punishment of the employer, but as compensation to the grievor.

(See Travers, unreported decision dated February 11, 1982.) In Re Mohawk College of Applied Arts & Technology and Ontario Public Service Employees' Union (1982), 1982 CanLII 5122 (ON LA), 5 L.A.C. (3d) 237, arbitrator H. D. Brown, expressed the same opinion:

In appropriate situations I am persuaded that interest on the amount of compensation awarded can be given so as to fully compensate the em­ployee who was wrongfully dismissed and to provide a full remedy for the breach of the agreement. The allowance for interest in those circum­stances arises as a matter of assessment of compensation and not as a penalty against the employer, but as offsetting monetary consideration for the lack of use of the money which the employee would have obtained had it not been for his dismissal.

24. It will be seen, therefore, that with certain exceptions — one of which will be ex­amined in a moment - there is a developing arbitral consensus in Ontario that a compensation award can include an interest component. If an aggrieved party has been out of his money for a period, there should be a compensatory interest payment for the time for which the sum has been outstanding.

25. Arbitrators in British Columbia now take the same position. In Re British Columbia Hydro and Power Authority and International Brotherhood of Electrical Workers, Local 258 (1982), 1982 CanLII 5139 (BC LA), 5 L.A.C. (3d) 179 (Baigent), the arbitration award includes the following comments:

A more basic question is whether an award in respect of back wages should include an amount for interest. In my view, it should. The pur­pose of any monetary award of back wages is to put the aggrieved party where he would have been had the agreement not been breached. In cases such as this the grievor would have received wages on a weekly basis over each month of the breach prior to the adjudication. The grievor was deprived of that money and, inferentially, of its use. I need not speculate on whether the grievor would have invested the money or whether he borrowed money during the period of the breach. The simple fact is that he was not in possession of it and I must now consider how to com­pensate him for that. In my view, any compensation which ignored the interest factor would not be consistent with the basic principle of dam­ages awards. In cases involving back wages, an employer's breach of the collective agreement has deprived the employee of the use of the money. A meaningful remedy should recognize that loss by including a sum in respect of interest so that the employee is fully compensated for the em­ployer's breach of the collective agreement.

It is true that the common law courts did not include in their damage awards an amount in respect of interest unless the contract between the parties provided for such a payment. That has changed with the Court Order Interest Act, R.S.B.C. 1979, c.76 (formerly the Prejudgment In­terest Act, t974 (B.C.), c.65), which now directs a "court" to award interest on moneys which are found to have been owing. In my view, an arbitration board is not a "court" within the meaning of that statute and the powers of an arbitration board under a collective agreement must be determined with reference to the Labour Code. The significance of the scheme under the Court Order Interest Act lies in its recognition that the "making whole" of a party wrongfully deprived of money should nor­mally include an amount in respect of interest.

In the case of an employee deprived of money because of a breach of a collective agreement the issue is one of restitution which is relatively straightforward and uncomplicated. In my view, there is no reason in law or policy why a grievor wrongfully deprived of his money at an earlier date should have to "make a case" for his entitlement to interest. While an arbitration board undoubtedly has the discretion to withhold a remedy in the particular circumstances of any case, interest should normally go as a matter of course in a situation where moneys have not been paid because of a breach of a collective agreement by either party.

An appeal from this award to the British Columbia Labour Relations Board was rejected be­cause the Board agreed with the arbitrator's ruling:

The principles of restitution indicate the grievor should be put in the same position he would have been in had the breach of the collective agreement not occurred. In days of high interest rates and high inflation, an award consisting merely of back wages would not adequately com­pensate the individual for the loss suffered in many cases. The grievor may have lost the use of money which is rightfully his for a significant period of time, or may have had to borrow in order to substitute for the money which should have been paid initially. That loss can adequately be compensated at the later time of the arbitration award through the awarding of damages including an interest factor.

Another way of viewing this, is to consider the effect of a late payment of the amount owing to the grievor. In times of high inflation, it is well known that payment in future devalued dollars, is not worth as much as payment in current dollars. If an arbitration board awards a grievor pay­ment of a certain sum one year after the date on which he should have had the money, the grievor will be out-of-pocket the difference between the amount he might have been paid, and the erosion factor due to in­flation at the date on which the awards is made. One way of compen­sating for this, would be to calculate the damage award in terms of "real dollars" back to the date of the breach of the collective agreement. An­other, and perhaps similar way, is to award interest on the damages.

Far from being punitive, the awarding of interest does no more than re­store the grievor to the position he might have been in had the breach of the collective agreement not occurred. It may be punitive to the grie­vor not to award interest and thereby give the employer the windfall of use of the money for a period of time. It certainly would not be punitive against the employer to award interest and make the grievor whole in respect of the breach of the collective agreement.

It should also not be forgotten that sometimes the employer is the grie­vor. In such cases, if damages are awarded, the same principles with re­spect to interest awards would apply.

While in both decisions there was reference to the British Columbia Labour Code, we do not think that, in respect of the power to award monetary compensation, the situation is any dif­ferent in Ontario. (See also, Re Pacific Western Airlines Limited and Canadian Airline Em­ployees' Association (1982), 1982 CanLII 5097 (CA LA), 7 L.A.C. (3d) 340 (Larson).)

26. The most interesting contrary view is that of Arbitrator R. H. MacLaren in Keep rite Products , supra. The essence of his rationale appears in the following passages from the award:

The board of arbitration is created by the contract between the parties described as a "collective agreement". The board is a creature of the parties' agreement with the jurisdiction conferred upon it by their agree­ment. The agreement is the fundamental source of the subject-matter that may come within the jurisdiction of this, or any other, board of arbi­tration. The collective agreement defines the substantive authority of the board. A clause, such as art. 23.13, is explicit recognition of these fun­damental propositions. Such a clause is nothing more than a restatement of the general principle found in contract law that a court, or board of arbitration, will not make a contract for the parties but merely interpret it. The function of a board of arbitration is to determine the parties' in­tention as expressed in the written collective agreement and not to de­scribe what the collective agreement should have been.

The legal rights of the parties in this case involve the application of the principles of the law of contracts and its assessment of damages. In discussing the general principles of the law of contracts it is often said that the innocent party must be put in as good a position as he would have been had the contract been performed. Professor Fridman in his textbook, The Law of Contract in Canada (1976), in a footnote at p. 575, qualifies that statement by saying: ..... this does not mean that interest on damages could be awarded at common law (unless there was an express or implied agreement between the parties to such effect)". Citing in sup­port of the proposition, the case of Eaton v. The Queen (1972 1972 CanLII 2080 (FC), 31 D.L.R. (3d) 723, [1972] F.C. 185, affirmed 1972 CanLII 1236 (ON CA), 42 D.L.R. (3d) 319. f 19721 F.C. 1257 (C.A.).

In the text of The Law and Practice of Commercial Arbitration aut­hored by the chairman of the present board of arbitration and Professor Palmer, it is stated at p. 88 that: "As a general rule, arbitrators have no jurisdiction to award interest on their awards. Any right to impose in­terest and cost must be conferred by statute." Citing in support of the proposition, Re Ketcheson and Canadian Northern Ontario R. Co. (1913), 1913 CanLII 457 (ON SCAD), 13 D.L.R. 854, 29 O.L.R. 339, 16 C.R.C. 286 (CA.); Re Wurz et al. and Gammel Construction Ltd. et al. (1978), 1978 CanLII 1986 (BC SC), 84 D.L.R. (3d) 68, [1978] 2 W.W.R. 450 (B.C.S.C.).

In view of the quotations from the foregoing authorities it seems clear that the principle of the common law measure of damages for lost ex­pectation does not embody interest except where there was a failure to pay money when it was due under a contract. The common law prop­osition has been altered by statute in England (see the footnote, to Pro­fessor Trietel's text) and in Ontario by the Judicature Act, R.S.O. 1970, c. 228, s. 38 (now R.S.O. 1980, c.223, s. 36). The Ontario provisions were further modified in 1977 by c. 51, s. 3(1) which rewrote s. 38 to permit the awarding of pre-judgement interest and further clarifying the previous cryptic provisions of s. 38 stating interest to be payable in all cases permitted by law.

It is' therefore, found that the common law principle, rooted in the law of contract, to assess damages for beach of a contract (or collective agreement), does not include interest. To the extent that Re Air Canada and Canadian Air Line Employees' Assoc. (1981), 29 L.A.C. (2d) 142 (Picher), does suggest the contrary it is found to be incorrect and is not upheld or followed in this decision.

27. The difficulty with this analysis is that it says both too much and too little: too much about the contractual foundation for the arbitration process which, as part of the col­lective agreement, is seen to be solely the creature of the parties, and too little about the sta­tutory function which the mandatory arbitration process is designed to achieve. With respect, where the parties have merely embraced the mandatory language of section 44 of the Act, does it make sense to ponder about what they intended — other than to comply with the law? Is it not equally important to consider what the Legislature must have intended when it made those words and resort to arbitration a compulsory part of every collective agreement? The statutory language is important, for as we have recently seen, the imperatives of the statute cannot be avoided even if the parties purport to do so expressly — see the recent line of ar­bitral and judicial decisions giving probationary employees access to arbitration even when, under the terms of the collective agreement, the parties have expressly denied it. To the extent which one must speculate about the particular intent of the parties, it could only be expressed in the general way that the Court did in Polymer or CBC: to put the aggrieved party in the position he would have been in had there been no breach. The artificiality of Professor MacLaren's approach is merely underlined in the circumstances of the present case where this Board is substituted for the forum provided in the agreement, where the collective agreement in question conveys rights upon individuals who are not employees of the respondent, where the respondent never expressly agreed to the clause in question, and where the respondent is not even a member of the employer bargaining agency which, by statute, has the right to ne­gotiate and conclude a binding collective agreement on its behalf.

28. Nor is it obvious to us why the parties' rights under a collective agreement should depend upon what the situation would be if a collective agreement were a commercial contract and if the powers of a labour arbitrator were the same as the powers of an arbitrator in a commercial context. Why should common law contract rules necessarily govern the interpre­tation of a legal document with characteristics, rooted in the statute, which are entirely foreign to the common law? Following the decision in West Coast Transmission (which was referred to with apparent approval in Billes v. Parkin Partnership Architects Planners (1983), 1983 CanLII 1810 (ON CA), 40 O.R. (2d) 525 (0. C. A.), there may be some doubt whether a commercial arbitrator can award interest; but even if he cannot, should the remedial authority of a labour arbitrator depend upon the jurisdiction of an adjudicator in entirely different circumstances? We do not think so; and it is interesting to note that while Professor Palmer's text on commercial arbitration is relied upon for the proposition that commercial arbitrators cannot award interest, Professor Palmer himself, sitting as a labour arbitrator in Canadian Canners, supra, had no difficulty in de­ciding that, in appropriate circumstances, a compensation award should include an interest component. We agree.

29. We see the present problem in very simple terms. Under section 44 of the Labour Relations Act, the parties are required to give an arbitrator the authority to render a "final and binding" determination of the matters in dispute between them. Those words appear in the collective agreement before us. They are undefined and unrestricted. Section 124 of the Act also empowers the Board to render a final and binding determination of the grievance before it. Since Polymer, it has been clear that an arbitrator has the power to award com­pensation, and as the decision of the Supreme Court of Canada in C.B. C., supra, indicates, the purpose of an award of compensation is to remedy the breach of the agreement and put the aggrieved party in the position it would have been in if there had been no violation of the collective agreement at all. West Coast Transmission affirmed (as a number of labour ar­bitrators have recognized) that an interest component is an important aspect of the measure of damages when an aggrieved party is able to establish that a sum of money should have been paid some months or years before. The interest component is not a penalty. It is part of the compensation for the loss incurred, and that there is a cost or loss arising when money is not paid on time is obvious to anyone who has worried about the size of his accounts re­ceivable. Thus, the issue before us really boils down to this: should the aggrieved employees in this case be compensated for the tangible and readily foreseeable losses which they have suffered as a result of the respondent's breach of the collective agreement? In our view, the answer is yes. We see no reason why this Board should apply a standard in which an ag­grieved party (be it the employer, the trade union, or an individual) should receive less than full compensation for a breach of the collective agreement. If there is to be such limitation upon the arbitrator's (or the Board's) remedial authority, it must be found in the express lan­guage of the parties' agreement. Here there is none; and that being so, we are of the view that the power to make a final and binding determination includes the power to make an in­terest component part of the compensation award.

30. Having regard to the foregoing, the Board is of the opinion that it has the authority to award a sum to compensate the grievors for the loss of the wages and the use of those funds which they would have had if in 1981 the employer had complied with the terms of the collective agreement. The only question remaining is how such loss may be calculated and quantified.

31. The cost of money must necessarily be somewhat indefinite, depending upon who is borrowing and what the funds would have been used for. An individual deprived of money which would be used for a consumer purchase may have to take out a loan or use a credit card carrying interest of more than twenty per cent. On the other hand, an individual whose wages would have been deposited in a savings account may have earned as little as eight per cent. In between, there are a variety of investment vehicles with a range of potential yields. Which of these interest rates should the Board take as a reasonable measure of the employees loss? In our view, we should take neither the low rate payable by the chartered banks on the savings deposits of their customers, nor the much higher rate which they charge individual borrowers who finance consumer purchases through the use of credit cards — even though, in today's society, the latter rate is probably a more accurate reflection of how individuals con­tinue their established consumption pattern in the face of temporary shortages of funds. It is more appropriate, in our view, to apply a formula similar to that used in the Judicature Act, and this Board in unfair labour practice cases (see: Practice Note 13), and to adopt the char­tered banks' prime rate at the time the proceeding is filed as a rough and ready, but never­theless, reasonable interest rate from which to calculate the loss which the employees have suffered by reason of the respondent's failure to employ them in October, 1981. That prime rate for December 1981, is 17.25 per cent. While this interest rate was unusually high in historical terms, it, nevertheless, reflects the economic reality at the time and, in our view, is a readily available and reasonable benchmark.

32. The circumstances in this case are somewhat different from those in Hallowell House, [19801 OLRB Rep. Jan. 35, in that while the breach of the agreement could be said to have begun at least by October 5, 1981 when the employees should have been hired, the company's direct liability terminated a few days later when it relented and hired the grievors or when they got alternative employment. The formula proposed in Hallowell House (on which Practice Note 13 is based) is not strictly applicable on the facts of this case. Moreover, the evidence does not disclose precisely when the employees would have been paid had they been hired in accordance with the terms of the agreement, so we cannot determine exactly how long they have been "out of pocket". It seems reasonable to assume, however, that had they been properly hired they would have received the earnings of which they were ultimately de­prived no later than the second weekly pay period following their hiring. It would be rea­sonable therefore to conclude that monies owing would have been paid at least by Friday, October 16, 1981. Accordingly, that is the date upon which our interest calculation is based.

33. Having regard to the foregoing, the Board finds that the respondent has failed to comply with the terms of the collective agreement by which it is bound and, by way of rem­edy, directs that:

34. the respondent forthwith pay to the trade union, for the benefit of its aggrieved members the sum of $5,435.28; and, in addition,

35. the sum of $1,972.98 to compensate them for the loss of the use of funds between October 16, 1981 and the date of this remedial di­rection.

The total sum, $7,408.76 shall be payable forthwith.