[1998] OLRB REP. JULY/AUGUST 622
0922-98-G Kennedy Masonry Company Limited, Applicant v. Labourers' International Union of North America, Local 183; Bricklayers, Masons Independent Union of Canada, Local 1; Masonry Council of Unions of Toronto and Vicinity, Responding Parties
BEFORE: R. O. MacDowell, Chair, and Board Members J. G. Knight and G. McMenemy
APPEARANCES: Clifford J. Hart and Nick Vatalaro for the applicant; Mark Lewis, Frank D Abbondanza and Janusz Argasinski for the responding parties; no one appearing for the Masonry Contractors Association of Toronto Inc.
DECISION OF THE BOARD; August 31, 1998
I - Introduction
These are the reasons for a decision of the Board dated July 14, 1998, in which the Board refused to accept a referral under section 133 of the Labour Relations Act, 1995 (as amended).
To make this decision easier to read, the applicant will be referred to as "the employer" or "Kennedy", and the various union parties will be referred to, collectively, as "the union". The Masonry Contractors Association of Toronto Inc. will be referred to simply as "MCAT".
We should note that this is the second application between these parties involving the same issue - namely, whether the Ontario Labour Relations Board should arbitrate a grievance arising under the parties' collective agreement or, alternatively, the Board should defer to the expedited arbitration process provided in that collective agreement. The first application ("Kennedy #1") canvassing this question resulted in a decision that is now reported at [1998] OLRIB Rep. Feb. 50. However, it is important to recognize that the statute has been changed since Kennedy #1 was decided, so, for completeness, this decision should be read together with the earlier one.
II - How the underlying "grievances" unfolded
The referral to arbitration that is now before the Board was made on June 1, 1998, and involves some fairly "run of the mill" allegations that Kennedy has improperly subcontracted the work of the bargaining unit, or has improperly employed individuals who are not union members. These are the kinds of allegations that routinely arise under construction industry collective agreements. There is nothing novel about the subject matter of the underlying grievances, or the way in which the grievances unfolded.
The grievances were first brought to Kennedy's attention by letters from the union dated April 23 and May 7, 1998. On May 13, 1998 the parties met in an effort to resolve those grievances, and when the settlement efforts were not successful, the union indicated to Kennedy that it would be referring the matters to "expedited arbitration" in accordance with the provisions of the collective agreement. This has been the union's standard practice since these provisions were added to the agreement (as a result of a strike) a couple of years ago.
Kennedy opposed that course of action. Kennedy objected to the "expedited arbitration" process set out in the collective agreement. In Kennedy's view, the Ontario Labour Relations Board was the proper forum for adjudicating the dispute. Kennedy said that it would immediately refer the grievances to the Board under section 133 of the Act (as it had done in Kennedy #1).
Following the settlement meeting, the union waited for seven days to see whether Kennedy would refer the grievances to the Board. When no such application was made, the union referred the grievances to expedited arbitration. The next day Kennedy made application to the Board under section 133 of the Act. It is that referral that is currently before us.
III - The statutory framework
Section 133 of the Act empowers the Board to act as arbitrator for grievances arising under construction industry collective agreements. Until very recently, section 133 read this way:
(1) Despite the grievance and arbitration provisions in a collective agreement or deemed to be included in a collective agreement under section 48, a party to a collective agreement between an employer or employers' organization and a trade union or council of trade unions may refer a grievance concerning the interpretation, application, administration or alleged violation of the agreement, including any question as to whether a matter is arbitrable, to the Board for final and binding determination.
(2) A referral under subsection (1) may be made in writing in the prescribed form by a party at any time after delivery of the written grievance to the other party, and the Board shall appoint a date for and hold a hearing within 14 days after receipt of the referral and may appoint a labour relations officer to confer with the parties and endeavour to effect a settlement before the hearing.
(3) Upon a referral under subsection (1), the Board has exclusive jurisdiction to hear and determine the difference or allegation raised in the grievance referred to it, including any question as to whether the matter is arbitrable, and subsections 48(10) and (12) to (20) apply with necessary modifications to the Board and to the enforcement of the decision of the Board.
(4) The expense of proceedings under this section, in the amount fixed by the regulations, shall be jointly paid by the parties to the Board for payment into the Consolidated Revenue Fund.
(emphasis added)
That is the statutory language that was in effect when Kennedy #1 was decided in February 1998. However, in June 1998, section 133 was amended, and now reads like this:
(1) Despite the grievance and arbitration provisions in a collective agreement or deemed to be included in a collective agreement under section 48, a party to a collective agreement between an employer or employers' organization and a trade union or council of trade unions may refer a grievance concerning the interpretation, application, administration or alleged violation of the agreement, including any question as to whether a matter is arbitrable, to the Board for final and binding determination.
(2) A referral under subsection (1) shall be in writing in the prescribed form and may be made at any time after the written grievance has been delivered to the other party.
(3) A party that refers a grievance under subsection (1) shall, at the same time, give a copy of the referral to the other party.
(4) The Board may refuse to accept a referral.
(5) In deciding whether or not to accept a referral, the Board is not required to hold a hearing and may appoint a labour relations officer to inquire into the referral and report to the Board.
(6) If the Board accepts the referral, the Board shall appoint a date for and hold a hearing within 14 days after receipt of the referral and may appoint a labour relations officer to confer with the parties and endeavour to effect a settlement before the hearing.
(7) The Board is not required to hold a hearing if the responding party does not file any material.
(8) If the Board does not hold a hearing in the circumstances described in subsection (7), the Board may determine the matter with reference only to the material filed by the party referring the grievance.
(9) If the Board accepts the referral, the Board has exclusive jurisdiction to hear and determine the difference or allegation raised in the grievance referred to it, including any question as to whether the matter is arbitrable, and subsections 48(10 and (12) to (20) apply with necessary modifications to the Board and to the enforcement of the decision of the Board.
(10) The Lieutenant Governor in Council may establish a schedule of fees to be charged to parties in proceedings under this section and, without limiting the generality of what can be included in the schedule, the schedule may provide for the following:
Fees payable for referring grievances or participating in proceedings.
Fees payable for each hearing day, including hearing days scheduled by the Board but not used.
Different fees for the referring party and for the responding parties.
A single fee for all the responding parties with the amount to be paid by each responding party to be determined by the Board.
(11) The schedule of fees may also provide for when the fees are due, to whom the fees shall be paid and what the form of payment must be.
(12) A party may participate in a proceeding only if the fees payable by the party are paid in accordance with the schedule of fees.
(13) If an award is made against a party who was given notice of but did not participate in proceedings under this section, the Board may order the party to pay the party in whose favour the award is made, an amount not exceeding the fees paid by the party in whose favour the order is made.
(14) The Board may order a party who participated in proceedings under this section but who was not in a position to participate on a day on which proceedings were scheduled to pay each of the other parties an amount not exceeding the fees paid by that party.
(15) The Board shall not make an order under subsection (14) ordering a party who was not in a position to participate to pay an amount to another party if the other party refused, unreasonably, to consent to an adjournment requested by the party who was not in a position to participate.
(16) Fees payable by a party to the Board shall be paid to the Board for payment into the Consolidated Revenue Fund.
(17) The schedule of fees is not a regulation within the meaning of the Regulations Act.
(emphasis added)
As will be seen, the former version of section 133 gave the Ontario Labour Relations Board what might be described as a "preemptive" jurisdiction to deal with any grievance arising out of a construction industry collective agreement. The referral to the Board could be made by any party to such agreement (i.e. regardless of who had initiated the grievance), and it did not matter that the collective agreement contained its own arbitration procedures. It was open to a party to bypass those procedures because section 133 (as it was then framed) made the Board available "despite the grievance and arbitration provisions in a collective agreement", and upon receipt of a referral, the Board had "exclusive jurisdiction to hear and determine the difference or allegation raised in the grievance referred to it".
However, that is no longer the statutory scheme. As a result of Bill 31 (proclaimed June 26, 1998), the Board now has a discretion to refuse to entertain such referral. That is what the union urges the Board to do in this case. The union urges the Board to "defer" to the expedited arbitration procedures found in the parties' collective agreement.
IV - Some history
This is the first case in which the Board has been asked to exercise what might be described as its new "deferral discretion" under section 133(4) of the Act. However, this is not the first time that the deferral issue has surfaced between these parties. On the contrary, the parties addressed the very same question a few months ago under the former version of section 133. There, as here, the union urged the Board to defer to the expedited arbitration procedures in the parties' collective agreement, and there, as here, Kennedy urged the Board to take jurisdiction. At paragraphs 8-13 of Kennedy #1, the Board summarized the union's argument this way:
The union argues that the grievance should be heard by the "permanent arbitrator" established under the expedited arbitration provisions of the coliective agreement. The union says that these procedures were triggered before the employer made any reference to the Board under section 133 of the Labour Relations Act, and that because the "private process" was already underway. section 133 is no longer available to the employer. In the alternative, the union urges the Board to defer to the mechanism that the bargaining parties (i.e. the "institutional parties" - MCAT and MCUTV) have established to resolve disputes about the application of their collective agreement.
The union points out that the expedited arbitration system was established through a process of free collective bargaining between the union on one hand, and the employer association of the other; and that the result was intended to be binding on all of the employers and employees covered by the collective agreement. In the union's submission, MCUTV and MCAT are sophisticated parties that understand the needs of their industry, so that it makes sense for the Board to try to accommodate their shared intention. The union submits that, from a policy point of view, the Board should try to reinforce the product of free collective bargaining.
The union maintains that the institutional parties have established an expedited arbitration process that is specifically tailored to the requirements of their sector of the construction industry, and they have provided for a single, permanent, adjudicator, who was selected by them because of his expertise. In the union's submission, that single adjudicator can respond much more quickly than the Ontario Labour Relations Board; moreover, a single "umpire" who hears all of the cases, is much more likely to achieve the uniform interpretation of the collective agreement that the institutional parties require. In the union's view, it is a laudable effort at industry self-regulation, which the Board should support.
In the union's submission, this "private system" guarantees a level playing field for all of the unionized employers and employees covered by the collective agreement, and establishes an arbitration mechanism that is clearly superior to the one available under section 133 of the Labour Relations Act. Not only is the negotiated scheme a more specialized process, tailored to the needs of the industry, but it is also faster, more flexible, and more effective than the statutory alternative. It ensures the prompt and equitable resolution of disputes, which, the union says, promotes the goal of industrial peace.
The union urges the Board not to undermine the negotiated system, which the bargaining parties have developed precisely because it was better than the option better available under section 133 of the Labour Relations Act. In the union's submission, section 133 should not be read so as to preclude a more efficacious private process.
The union makes much the same argument in the instant case, and points out that the statute has been changed since the Board's decision in Kennedy #1. However, the relevant provisions of the collective agreement have not changed.
The collective agreement under review is the product of negotiations between the union, on one hand, and an employer association named "MCAT" on the other. The union represents employees doing masonry work. MCAT represents "unionized" employers in the masonry business. These "institutional parties" engage in "industry-wide bargaining", which produces a so-called "master agreement" that is binding on the various union parties, the employers (like Kennedy) who are members of MCAT, and the employees. The master agreement establishes uniform terms and conditions of employment, as well as a common framework for resolving employer-union disputes.
There is no dispute that, as a member of MCAT, Kennedy is bound by the master agreement. In fact, there was a representative of Kennedy on the MCAT bargaining committee that negotiated the master agreement. So whether or not Kennedy agrees with the expedited arbitration provisions, their presence in the agreement can come as no surprise. Kennedy was "at the table" when the agreement was concluded.
The master agreement contains some fairly standard provisions respecting wages, hours of work, benefits contributions, prohibitions against using non-union labour, and so on. However, the agreement does much more than fix the terms of the "wage-work bargain". The agreement also contains a number of provisions designed to guarantee compliance with the negotiated terms. These provisions ensure that aggrieved parties will obtain timely redress for breaches of the collective agreement. However, they also ensure that no employer will derive a competitive advantage from either noncompliance or delayed compliance with its collective bargaining obligations. These latter objectives are extremely important from both a union and employer perspective - as the both a union and employer perspective Board observed in Kennedy #1:
It is easy enough, therefore, to see why trade unions might want to maintain uniform wage rates, and will try to enforce compliance with the negotiated terms. The effective enforcement of the agreement provides immediate benefits for their members, and acts as a deterrent for other employers, who might be tempted to dodge their contractual obligations. So, from a trade union point of view, "policing the agreement" is important.
However, unionized employers are also interested in these objectives. Indeed, in this regard, unions, and unionized employers, share a common interest.
No doubt most employers in the construction industry have as little appetite to deal with trade unions as employers in other sectors of the economy. There is nothing unlawful or particularly surprising about that. Being "non-union" can sometimes give a commercial advantage, because it usually means lower labour costs.
However, once a group of companies becomes "unionized", those same employers have an economic interest in maintaining the negotiated rates - which is to say, preventing their unionized competitors from undercutting those rates, either through negotiating "preferential treatment" or through undetected non-compliance with the collective agreement. In either case, the unionized competitor can obtain an illegitimate cost advantage, that works in its favour in the bidding contest, and to the detriment of both unionized employees and other unionized employers.
While all of this may seem obvious, it is worth emphasizing again that, once bound by a collective agreement, all unionized employers have an interest in ensuring that those against whom they bid do not obtain a competitive advantage by undercutting the negotiated wage rates. Employers want a level playing field. They want the collective agreement effectively enforced. That is why there is often broad employer support for expedited arbitration mechanisms of the kind that one finds in the master agreement between MCAT and MCUTV. Employers benefit from contract compliance, and are prejudiced if the agreement is not properly "policed".
The special enforcement mechanism (of which expedited arbitration is a part) serves a number of related purposes. First of all, in a construction industry context where time is "of the essence", it provides an expeditious procedure for remedying collective-agreement violations. (For a discussion of the problems of collective agreement compliance in the construction industry see Kennedy #1, paragraphs 31-67.) In the absence of such procedures, unions might be tempted to resort to the "self-help" approach of strikes or picketing - actions which would have a disruptive effect on the entire construction site (again, see the discussion at paragraphs 49-52 of Kennedy #1). However, what is equally important, from an institutional point of view, is a web of supporting provisions that ensure that all unionized companies will operate "on a level playing field". These provisions guarantee that defaulting employers will be deprived of any benefits flowing from non-compliance with the collective agreement, and will face additional levies and costs if they try to operate outside the negotiated regime. The purpose of these financial sanctions is to discourage deviations from the negotiated norm. To put the matter colloquially: they help keep the members of MCAT "in line".
This deterrent effect is, of course, important to the union. But it is also of real interest to the unionized competitors of the defaulting employer, and in a significant sense, reinforces the system of multi-employer bargaining. For, if individual employers were able to avoid or delay the application of the collective agreement, the multi-employer bargaining system would quickly crumble, because it depends upon all employers adhering to the master agreement despite commercial pressures to do otherwise. The enforcement mechanism therefore has an institutional value, quite apart from the recovery of monies owing in a particular case. It helps reinforce and bind the employers to the "master bargaining process" - a process which contributes to stability in this sector of the construction industry.
In Kennedy #1, the Board was quite sympathetic to the union's argument that the dispute should be dealt with under the provisions of the master agreement. The Board observed:
From a purely "policy" point of view (i.e. what is best for labour relations in the construction industry), it seems to me that the union's position is unassailable. After all, section 2 of the Labour Relations Act, 1995 includes these stated "Purposes":
To recognize the importance of workplace parties adapting to change.
To encourage co-operative participation of employers and trade unions in resolving workplace issues.
To promote the expeditious resolution of workplace disputes.
The expedited arbitration mechanism is consistent with all of these themes. The institutional parties in this case have adapted to the changing environment of the construction industry. They have participated in developing their own mechanism for resolving workplace disputes. And they have created a more expeditious process than the one available under the statute, in a context in which expedition is important. In fact, despite Kennedy's objection, the institutional parties' arrangement probably accomplishes the stated statutory objective much better than the statutory model does. Moreover, it makes no demands at all on the public purse.
Now, no doubt, in 1975, [when section 133 first entered the statute] no one seriously believed that bargaining parties would, or could, negotiate their own expedited procedures. Nor did they - then. That is why legislative intervention was necessary; and, even today. the prospect of a hearing within 14 days of filing a grievance is relatively speedy compared to most negotiated alternatives. The fact remains, however, that construction collective bargaining at the millennium is not the same as it was 30 years ago, so that at least in some settings, section 133 is arguably redundant because the parties have effectively addressed the problems themselves.
Nevertheless, the Board ultimately concluded that section 133 (as it was then framed) required the Board to take jurisdiction. The Board went on to say:
I recognize that what I have described as the "pre-emptive effect" of section 133 may inhibit the ability of parties to negotiate private systems that are better than the statutory model, that those private systems can relieve pressures on the public purse, and that they are in no way inconsistent with the policy thrust of section 133. I also recognize that, when section 133 was enacted in 1975, there was little prospect of a privately negotiated system that was as expeditious as the one in the agreement before me in this case. So. to this extent, it might be said that section 133 is obsolete (at least in some settings), and that the Board "should" have the general discretion to defer to private processes that are just as effective as the statutory alternative. Such discretion exists in Section 96 of the Act (the unfair labour practice provisions), and there is a good argument that it "should" exist in section 133 as well.
However, that is a matter which must be addressed by the Legislature. I do not think that such discretion can be found in section 133, as it is currently framed.
The statute was amended five months later, so that the Board now has the "discretion" which it lacked when Kennedy #1 was decided.
V - An aside on the Bricklayers' enforcement system
The Bricklayers' enforcement system is a fundamental component of the collective agreement, and, as we have already noted, that system has as much to do with bolstering institutional relationships as securing redress for individual claims. It was the parties' answer to widespread problems of non-compliance in their sector of the construction industry - problems which were undermining both the integrity of the master agreement and the efficacy of master bargaining. However, because expedited arbitration is an element in this integrated whole, it may be useful to look briefly at some of the special features of the negotiated scheme. These features help illuminate the institutional context within which our section 133 discretion might be exercised, and may bear upon the "penalty clause" argument which Kennedy says should prompt this Board to take jurisdiction (see below). And, as will be seen, the system operates at a number of levels, and has a "regulatory flavour" which is very different from, say, a bilateral contract for the purchase/sale of goods, or even a typical bilateral collective agreement. There is no obvious "common law benchmark" or point of comparison.
The Toronto Residential Construction Labour Bureau ("TRCLB") represents builders who engage the masonry subcontractors represented by MCAT. Strictly speaking, the TRCLB is not a negotiating party to the masonry collective agreement or the direct employer of any of the bricklayers (etc.) represented by the union. Nor is the TRCLB a party to the general provisions of the MCAT collective agreement. Nevertheless, the TRCLB has "signed on" to the enforcement portion of the agreement, and has undertaken to advise the union of any residential projects where masonry work will be done. The TRCLB has also agreed to supply the name of any masonry subcontractor to whom the work has been awarded. In both cases there are "penalties" payable by the TRCLB (to the expedited arbitration administration fund) for failure to give the proper notices.
At first glance it might seem odd that a "third party" has been drawn into the bargaining relationship between the union and MCAT. However, upon reflection, this makes sense. Ineffective enforcement procedures might lead to instability on building sites or a breakdown of the master bargaining system - both of which impinge upon the interests of the TRCLB. The "builders" have an interest in orderly, industry-wide collective bargaining arrangements, as well as the effective resolution of grievances without stoppage of work. That is why the TRCLB has agreed to be added to the collective agreement in order to facilitate uniform enforcement across this sector of the construction industry. The builders have joined forces with the union and MCAT to help regulate and stabilize the industry.
Information from the builders allows the union to pinpoint MCAT members who are engaged in construction work to which the collective agreement applies. That information facilitates enforcement. However, it is interesting to note in this regard that the union is specifically obliged to apply the agreement, uniformly, to all of the employers bound by it. There is an express undertaking, binding the union to make sure that all employers are treated alike, and that all employers "toe the line".
The agreement specifically prohibits favouritism, "private deals" or selective enforcement of the collective agreement. The union must maintain a "level playing field"; and to bolster this obligation the union must establish an "investigation committee" to consider
"any complaint that the union business representatives or union members have agreed to and/or condoned violations of the collective agreement or otherwise failed to take appropriate action or acted inappropriately in dealing with violations of the collective agreement and/or the bricklaying enforcement system with builders, primary masonry contractors and/or masonry contractors."
Such complaints can lead to charges under the union constitution or a reference to the permanent expedited arbitrator. Article VII of the enforcement mechanism provides, in part:
Where the arbitrator is satisfied that the union, a masonry contractor, a prime masonry contractor or builder has engaged in a deliberate concerted effort to undermine, evade or avoid the provisions of the collective agreement and/or this Bricklaying Enforcement System, the arbitrator may apportion responsibility for such acts against the union and any builder, prime masonry contractor and/or masonry contractor and award the payment of damages and/or penalties payable to the expedited arbitration administration account only, in addition to any and all sums payable through the expedited arbitration system hereunder
In other words, not only can a defaulting employer be required to remedy its breach of the collective agreement, but the union can also be liable for condoning or facilitating deviations from the negotiated terms. So can a "builder" who helps an MCAT subcontractor avoid the terms of the collective agreement. And union officials, too, can be penalized for permitting any divergence. So what these provisions do, is bind all industrial participants to a common objective: maintaining the negotiated terms.
Under the enforcement mechanism, the union and employer alike are required to supply letters of credit to secure payment for sums arising under the collective agreement. Neither party can shelter behind an apparent "inability to pay". Defaulting employers can also be required to post security for future liabilities. In addition, under the heading "Builders Holdback", Article III of the enforcement system provides:
The union may. at any time, at its option, activate the holdback mechanism described herein. The holdback mechanism is in addition to, and separate from, the expedited arbitration process.
As in the case of the notice provisions (an "early warning system"), the builders are enlisted to promote compliance with the negotiated terms.
These various provisions are separate and distinct from the arbitration mechanism. But they either supplement that arbitration process or ensure that arbitration will not be a fruitless exercise. They also provide that in the sometimes volatile commercial environment of the construction industry, employers must maintain the financial ability to meet their obligations. Again, to put the matter coloquially: they keep employers and union officials "in line" by making it expensive for them to ignore the terms of the agreement. Speedy redress is supplemented by negotiated penalties for breaching the agreement.
The expedited arbitration procedures contain a number of features that are quite different from the statutory scheme, and are also quite different from what one normally finds in collective agreements. For example, service of the grievance can be effected by fax, and a hearing can be held on very short notice, (as little as 48 hours) in the evenings, at the union's premises. And in scheduling the hearings, the arbitrator need not accommodate the schedule of any legal counsel who may be retained.
In the negotiated system, time is very much "of the essence", and the ability to cause delay has been very carefully circumscribed. The institutional parties have fashioned a regime which largely forecloses what, in other contexts, might be a more leisurely litigation process, susceptible to normal "litigation tactics". These clauses prevent an employer from "buying time" while it carries on business outside the collectively-bargained framework. They ensure that, in all likelihood, there will be a "legal answer" while the job is ongoing, and before the employer and the affected employees have drifted away to some other project or work site. (For a discussion of the practical labour relations consequence of delaying tactics see Kennedy #1, paragraphs 46-53.)
The enforcement mechanism also contains a number of provisions respecting remedies, once a breach of the collective agreement has been established. For example: under item 8, the arbitrator has no 'jurisdiction to apply any principles of estoppel or waiver to reduce any amounts payable by the masonry contractor in respect of [a violation of the collective agreement]”; the employer found in breach of the collective agreement is responsible for the arbitration and collection costs; and, pursuant to Article 19.07(d) (which stands apart from the enforcement mechanism itself) the employer must pay an additional 10% of the unpaid amount to the trade union. All of these provisions encourage employer compliance, and operate as a deterrent to those employers who might be tempted to depart from the terms of the collective agreement.
There are similar incentives and deterrents aimed at employees.
If an employee files a timely grievance in respect of non-payment of certain monetary items (wages, overtime premiums, etc.), the employee may receive full recovery, plus an additional percentage of the unpaid amount. On the other hand, a tardy grievance will attract less than full recovery, with the difference being directed to the expedited arbitration administration fund. Thus, as in the case of employers, there are financial incentives for desirable behaviour and financial disincentives for undesirable behaviour.
We do not think that it is necessary to multiply the examples. It is evident that the “institutional parties” have negotiated an elaborate code, with detailed provisions to encourage compliance with the negotiated terms and specific sanctions to discourage non-compliance. These incentives and disincentives are applicable to unions, employers, and employees alike. And the parties make no bones about the fact that some of these provisions involve financial “penalties” for conduct that is corrosive to the collective bargaining regime.
The agreement is a multi-faceted response to what counsel for the union described as a pervasive pattern of "cheating" that prevailed prior to the 1995 round of bargaining - individual employers who undercut the negotiated rate for competitive advantage, individual employees who accepted lower rates to secure access to work, and union officials who were less than diligent or engaged in "favouritism" in respect of particular contractors. That is the situation that contributed to the 1995 strike; and that is what prompted the institutional parties to negotiate what they hoped would provide a solution. And, according to union counsel, the system is working. The enforcement mechanism has discouraged behaviour that, before its introduction, was threatening the integrity of the collective agreement and the collective bargaining process itself.
Among the negotiated provisions of the "enforcement system" are those that provide for expedited arbitration. Item 13 of the expedited arbitration process reads as follows:
This arbitration process shall be in addition to and without prejudice to any other procedures and remedies that the parties may enjoy including applications to a Court; or to the Ontario Labour Relations Board pursuant to section 96 of the Labour Relations Act, 1995, as amended; or under the Construction Lien Act; or any other operative legislation; or provided under any collective agreement. Any Grievance concerning the interpretation, application, administration or alleged violation of the Collective Agreement may be processed through the grievance/arbitration procedure outlined in Articles 4 and 5 of the Collective Agreement or under this Expedited Arbitration Procedure or referred to arbitration pursuant to section 133 of the Labour Relations Act, 1995 provided however that any grievance may not be processed under more than one of these arbitration mechanisms. Where a Grievance has been properly referred to the procedure provided for In this Bricklayers' Bricklaying Enforcement System, it is understood and agreed that all of the parties shall be deemed to have waived any right to refer the Grievance to arbitration under section 133 of the Labour Relations Act, 1995 or pursuant to Articles 4 and 5 of the Collective Agreement and any such referral shall be null and void. It is understood and agreed that the Arbitrator's decision is null and binding with respect to those matters remitted to the Arbitrator. The Arbitrator shall have all the powers of an Arbitrator under the Labour Relations Act, 1995, as amended, including but not limited to the power to require records and/or documents to be produced prior to and/or at the hearing and the power to Issue summons to witness and thereby compel attendance. The decision of the Arbitrator, inclusive of orders for payment of any monies in respect of damages, costs, Arbitrators' fees and/or penalties, is deemed to be a decision of an Arbitrator pursuant to the Labour Relations Act, 1995, as amended, and enforceable as such.
(emphasis added)
- These are the provisions that were before the Board in Kennedy #1, and are before this panel again in the instant case.
VI - Discussion
Given the language of section 133 (as amended), there is no question that this Board has jurisdiction to entertain the referral. The question is whether the Board should do so in the circumstances of this case.
If one begins with the language of the collective agreement itself, there is no doubt whatsoever about the intention of the negotiating parties. Their language could not be clearer (see item 13 reproduced above): they intended to create an expedited arbitration process that specifically and unequivocally ousts section 133 of the Act, once a reference to expedited arbitration has been made (as it was here). That objective may not have been totally achievable under the former version of section 133. But the statute has now been changed; and it is difficult to resist the conclusion that the recent amendment was intended to facilitate the very kind of self-regulation that the parties have engaged in here. Accordingly, fidelity to the collective agreement language and the apparent purpose of the statutory amendment both support deferral to the privately-negotiated arbitration process.
The Bricklaying Enforcement System was negotiated by sophisticated institutional parties in an effort to cope with a range of problems in their sector of the construction industry. As counsel explained, it was part of a package of revisions that settled the 1995 strike - a strike which was, in part, a response to widespread abuse that was undermining the provisions of the master agreement, as well as the master bargaining process itself. That is the problem which prompted the institutional parties to create the multi-faceted mechanism described above - including the system of negotiated incentives and penalties. It is a form of self-regulation with which (in our view) the Board should be reluctant to tinker.
It is also important to emphasize that, from a labour relations perspective, there is nothing unconscionable about the enforcement mechanism, or the objective that it is designed to achieve; moreover, it emerges from an institutional setting in which individual employers are not obliged to participate. Individual employers do not have to belong to MCAT. Individual employers can decide to negotiate on their own. However, once they decide to band together to negotiate a master agreement, it is hardly surprising - indeed it is commercially sensible - that the union and the employer association would fashion a framework from which participants could not deviate. Otherwise there would be little value in multi-employer bargaining.
From this perspective, therefore, the expedited arbitration component of the system is more than just a simplified procedure for collecting monies owing. It is one element in a broader framework designed to achieve a level playing field for the employer-competitors bound by the master agreement. It bolsters the collective-bargaining regime. And it does that (in part) by imposing an expedited arbitration process, as well as a schedule of financial penalties on parties who deviate from the negotiated norm. To be colloquial once again: it is a system of "carrots" and "sticks" which the institutional parties (and the builders) hope will bolster both the bargaining process and the bargaining outcome.
In our view, it is inappropriate to separate the arbitration component from the overall regulatory scheme, or to disregard the industry problems to which the parties have turned their attention. Nor, in our view, should the Board lightly embrace an interpretation which would fragment or frustrate that scheme. For not only is the enforcement process a sensible one, given the parties' history and problems, but in our opinion, there is no reason for the Board to insert itself into that process. To put the matter another way: there is no reason for the Board to usurp the role that sophisticated institutional parties have so clearly consigned to the expedited arbitrator.
The expedited arbitration mechanism devised by the parties is faster, more flexible, and just as "final" as the process available under section 133 of the Act; and the permanent arbitrator's decisions are just as "enforceable" as those of the Board (pursuant to sections 48(1 8)-(20) of the Act). It is a process which is neither substantively nor remedially deficient. Moreover, the permanent arbitrator will have an expertise and sensitivity to the parties' needs. That is what flows from a system in which the permanent umpire" will see the whole range of issues which surface in this corner of the industry. That, no doubt, was one of the reasons why the institutional parties opted for a "permanent umpire" system.
It is evident that the institutional parties have carefully selected the adjudicator and tailored his/her jurisdiction to their own needs. They have created their own model of self-regulation. They have "customized" their own arbitration forum. And, in our view, there is no reason to prefer the Board's processes over those created by the parties themselves - particularly since the parties have equipped the arbitrator with an arsenal of specific remedial tools to deal with the problems that s/he may face. Indeed, as the Board observed in Kennedy #1, this "private system" probably accomplishes the statutory objective much better than the statutory model does.
In summary, the "private process” is completely congruent with statutory objectives, is no less effective, and, of course, makes no demands at all on the public purse.
Counsel for Kennedy submits that it is inappropriate to force the company into a forum where equitable relief may not be available, or where the company might be subjected to offensive "penalty clauses" which, he says, the Board might decline to enforce. Counsel submits that these burdens would be avoided if the Board took jurisdiction, because, he says, the provisions in question can only be utilized by the expedited arbitrator. In other words (according to counsel) by coming to the Board, Kennedy would not only enjoy a more leisurely litigation process, it would also be relieved from certain provisions of the collective agreement (for example, paying the union's collection costs or a 10% surcharge in addition to any unpaid amounts).
However, there are a number of problems with these propositions.
In the first place, it is by no means clear why the Board should take jurisdiction simply to relieve an employer of a burden that was freely negotiated by an employer association, and that would obtain in the domestic tribunal that was specifically created to enforce those terms. If anything, these negotiated differences of approach might prompt the Board to defer to the domestic alternative, which has been so carefully constructed by the parties to produce a result that is different from the one that would obtain under section 133 of the Act. That, after all, is the thrust of the amended section 133 -which now permits parties to construct their own arbitration alternative to which the Board may defer. And as we have already observed: there is no collision between the objectives of the statute and the provisions that the parties have negotiated in this case.
Nor is it evident why this Board should decline to enforce substantive terms, merely because those terms may be found in the grievance-arbitration provisions of the collective agreement. Section 133(1) makes the Board available as an arbitral forum despite the grievance-arbitration provisions of a collective agreement. But the focus of section 133 is on forum. Nothing in section 133 requires the Board to ignore provisions which are otherwise applicable to the case before it. In fact, the inclusion of section 48(16) (dealing with time limits) suggests the contrary - that the Board may be required to consider and apply provisions that are typically found in the grievance procedure portion of the collective agreement.
Now there may be cases where the Board might be inclined to interpret section 133 in order to ensure that a case gets dealt with on its merits rather than some "technical ground". That is perhaps part and parcel of the provisions making the Board available to deal with construction industry grievance problems "despite the grievance and arbitration provisions in a collective agreement". The Board can be used if the domestic alternative is procedurally, substantively or remedially inadequate. However, where the collective agreement contains an equally efficacious process, together with negotiated remedial provisions (the "Letters of Credit clause", for example), we see no reason why this Board would not enforce them, in the same way as the expedited arbitrator would. And if that is so - as we believe it is - there is no particular reason to prefer the publicly-funded over the privately-funded arbitration alternative.
Kennedy submits that it is "offensive" to be subjected to a regime which precludes an argument based on estoppel. Kennedy objects to the absence of "equitable relief'. But assuming, for the moment, that the Board could disregard this provision of the collective agreement, is there any reason why the Board should do so? Is this term inconsistent with the Act, or in any way antithetical to the collective bargaining scheme? In our view, the answer is no.
Section 1 of the Act requires that the terms of the collective agreement be in writing, and there was once some debate about whether the doctrine of "estoppel" could be available to relieve against the strict application of those terms (see, for example: Re Sarnia General Hospital and London District Building Service Workers' Union, Local 220, S.E.1.U. (1972), 1972 CanLII 742 (ON HCJDC), 30 D.L.R. (3d) 660). It was argued that an arbitrator was not permitted to depart from the "writing" contemplated by the statutory definition - particularly if the agreement contained a clause (as they usually do) requiring fidelity to the written words. However, that is no longer the prevailing legal view. It is now fairly well accepted that arbitrators have the authority to apply estoppel in a collective agreement context.
On the other hand, there is no reason why the bargaining parties cannot, by express language, require strict adherence to the written terms, or exclude the potential effect of collateral representations. Clauses like that are not unknown in other commercial contexts (real estate transactions, for example). And here they have a valid collective bargaining purpose: to ensure a level playing field.
In a system where all employers must abide by the same bargain and union officials can be penalized for permitting any deviations, it is hardly surprising that the parties would attempt to exclude common law notions that might relieve an employer of its obligations - which is to say, that would not only deprive employees of a remedy, but would also give one employer competitor a commercial advantage over another. The purpose of bargaining through MCAT is to ensure that all employers will be bound by the same rules, and the purpose of the enforcement mechanism is to deter deviations. In that context, there is nothing offensive about preventing deviations from the contractual norm founded on collateral representations, or preventing the importation of common law notions antithetical to the collective bargaining objective. A provision preventing waiver or estoppel is not only "fair" from the point of view of other employer-competitors, it is also consistent with the institutional needs of the negotiating parties.
Counsel further argues that the collective agreement contains "penalty clauses" which, he says, this Board would not apply, either as a matter of "public policy" or based upon what might be described as a "common law approach" to collective agreement interpretation (i.e. if a contract clause does not envisage a genuine pre-estimate of actual damages - as an additional surcharge would not -then the clause may be "void" and unenforceable). Counsel therefore urges the Board to take jurisdiction to avoid the application of these "penalties" at the hands of the expedited arbitrator, whom, he says, is more likely to apply the agreement in accordance with its terms.
But, again, there are a number of problems with this position.
If there is a valid legal argument preventing the application of certain collective agreement provisions, the expedited arbitrator is as capable of dealing with that legal argument as the Labour Relations Board, acting as arbitrator. In both cases, the adjudicators derive their authority from the collective agreement and from section 48 of the Labour Relations Act; and in both cases, the adjudicators are required to interpret the collective agreement in accordance with the established law. If a collective agreement provision is "void" or unenforceable for some reason, an arbitrator is fully equipped to make that finding.
More fundamentally, though, there is nothing in the Labour Relations Act which prevents "penalty clauses" of the kind that are found in this collective agreement; and there is nothing on the face of section 133 which allows the Board to ignore provisions which it might think are unduly onerous, (be they some financial penalty or the kind of "specific penalty" mentioned in section 48(17) of the Act). Nor is there any reason (or perhaps jurisdiction) for an arbitrator to import some common law notion to nullify the plain language of the collective agreement. For as the Supreme Court of Canada has reminded us in McGavin Toastmaster Ltd. v. Ainscough et al., [1976] S.C.R. 718, common law contractual notions have very limited application to collective agreements; and in cases such as Union Carbide v. Weiler et al (1968), 1968 CanLII 26 (SCC), 70 D.L.R. (2d) 333 (S.C.C.), that Court has also reminded arbitrators that they have no authority to ignore the negotiated consequences of the parties' language, simply because the arbitrator believes those consequences to be unfair. That is why the Legislature has added section 48(16) to the Act to modify the impact of "mandatory" time limits. Without such authority, an arbitrator might be obliged to reject a claim even though that consequence was out of all proportion to the time limit breach (a "penalty", as it were).
In this regard, the situation is quite different from the collision with a collateral statute which must, of course, override the provisions of the agreement. If there is an operating incompatibility between the collective agreement and a statute, it is the statute which must prevail. For example, if a statute prescribes the maximum amount of interest that may be charged and such statute applies to collective agreements, the agreement cannot exceed the stipulated ceiling. However, in the absence of some statutory override, it is not at all clear why a "penalty" should not be enforced - just as an arbitrator might be obliged to enforce a mandatory time limit, were it not for section 48(16) of the Act. Nor is it clear where an arbitrator - which is what the Board is under section 133 - gets jurisdiction to decline to enforce the negotiated terms (in effect rewriting the terms of the collective agreement). Certainly there is nothing like section 48(16) which expressly confers that authority.
It must also be remembered that the so-called "penalty clauses" in this case are part of a broader scheme with a significant institutional purpose, beyond the sums of money involved. They cement institutional collective bargaining relationships which have no common law counterpart, and they reflect the exercise of "bargaining power" which is recognized and sanctioned by the statute. It is also worth repeating that the so-called "penalties" are in the collective agreement because a union and employer association have agreed to put them there. They are part of a broader scheme of regulation, thought to be in the common collective interest. They do not stand alone.
Against that background, the "common law question" ("is this a genuine pre-estimate of liquidated damages?") is quite simply irrelevant. It not only presupposes that collective agreements must conform to common law norms (which they do not), and that arbitrators may decline to apply provisions which they consider unduly onerous (which is quite problematic), but also that the exercise is one of balancing some economic equation - irrespective of other bonafide institutional considerations or collective bargaining purposes for the provisions under review. But to focus solely on the monetary arithmetic completely ignores the overall purpose of these clauses, as well as the language and intent of the negotiating parties. And, in context, we do not find the "penalties" in this agreement to be particularly offensive in any event.
Accordingly, the fact that these clauses may seem onerous to a defaulting employer, or might involve negotiated "penalties" is neither a reason why this Board would not enforce them, nor a reason why this Board should take jurisdiction lest the "private arbitrator" be more inclined to do so.
In summary, when the circumstances of this case are considered as a whole, we see no reason to take jurisdiction over the underlying grievances.
In our view, it makes more sense to refuse the referral pursuant to section 133(4) of the Act, so that the matters can proceed to resolution in accordance with the negotiated provisions of the master agreement.
VII - Concluding Observations
Counsel for Kennedy submits that it is important for the parties to "know the rules of the game" - that is, to understand in light of the recent amendment, when the Board will defer, when it will not, and how the Board's approach may be different from the one adopted by the "private arbitrator". Counsel submits that until these "rules" are clarified, parties like Kennedy will have to make referrals to the Board simply to clarify their options.
We can appreciate the community's desire for guidance about how the Board may exercise its new jurisdiction to defer to privately-negotiated alternatives. To some extent, this decision may provide some illumination. However, at this early stage, it is probably unwise to be too definitive. All that can be said is that the Board might be less inclined to defer and more inclined to hear a matter itself
if the alternative arbitration process under the collective agreement was more cumbersome, slower, or remedially inadequate;
if the alternative arbitration process was unlikely to deal with the real substance or merits of the case, thereby precipitating labour relations discord;
if the subject matter of the grievance could not be dealt with, or could not be dealt with completely, under the private process (thereby raising the spectre of double forums and double litigation);
if there is an underlying jurisdictional dispute, unfair labour practice, successorship or related employer issue, or some third-party union interest which could not be adequately or economically dealt with by the private arbitration process; or
if there were some other persuasive policy reason why the Board should deal with the case itself.
- However, in the absence of compelling circumstances of this kind, it seems to us that the language of the collective agreement should prevail.