Lakeport Beverages v. Teamsters Local Union 938, 2005 ONCA 29339

Lakeport Beverages, a division of Lakeport Brewing Corp. v. Teamsters Local Union 938 [Indexed as: Lakeport Beverages v. Teamsters Local Union 938]

77 O.R. (3d) 543

[2005] O.J. No. 3488

Docket: C41931

Court of Appeal for Ontario,

Catzman, Laskin and Armstrong JJ.A.

August 19, 2005

Employment -- Labour relations -- Arbitration -- Judicial review -- Standard of review of arbitrator's decision interpreting collective agreement that of patent unreasonableness.

Employment -- Labour relations -- Collective agreement -- Interpretation -- Collective agreement permitting employer to hire seasonal employees at lower wages and without benefits given to seniority employees -- Employer laying off seniority employees and then proposing to recall seniority employees as seasonal employees and to pay them seasonal employee wage rate -- Arbitrator ruling that "seasonal employee" was employment classification under collective agreement and that management rights clause gave employer right to recall seniority employees as seasonal employees -- Arbitrator's decision patently unreasonable -- "Seasonal employee" employment status rather than employment classification.

Under the collective agreement between the parties, seniority employees enjoy the full range of benefits, including entitlement to a comprehensive health and [page544] welfare plan, the right to be recalled from layoff to perform available work, the right to apply for posted jobs, the right to be disciplined or discharged only for just cause and the right to access grievance and arbitration procedures. The employer's business fluctuated annually, so Article 20.02 of the collective agreement permitted the employer to hire seasonal employees during its busy seasons. Seasonal employees were not entitled to any of the rights and benefits accorded seniority employees and were paid wage rates ranging from $7 to $14 per hour less than seniority employees, although they performed the same type of work. In September 2002, the employer laid off 68 seniority employees. In early 2003, it announced that it intended to hire 77 seasonal employees to meet its anticipated summer demand, and that it proposed to recall the laid-off seniority employees before hiring new employees, and to treat those seniority employees as seasonal employees during the recall period. The union objected. To resolve the dispute, the employer filed a policy grievance. The arbitrator concluded that the employer would not violate the collective agreement by recalling seniority employees as seasonal employees and paying them the lower wage range. The Divisional Court allowed the union's application to quash the award, holding that the arbitrator's interpretation of the collective agreement was irrational, principally because the arbitrator mischaracterized "seasonal employee" as an employment classification under the collective agreement when, in fact, it was an employment status. The employer appealed.

Held, the appeal should be dismissed.

The standard of review in Ontario of the decision of an arbitrator interpreting a collective agreement remains that of patent unreasonableness.

The arbitrator mischaracterized "seasonal employee" as a job classification and effectively rewrote Article 20 to do so. Article 20.02 demonstrated that "seasonal employee", like "probationary employee", is an employment status, not an employment classification, and that laid-off seniority employees cannot be recalled as seasonal employees. The arbitrator's interpretation did not merely change a seniority employee's job classification, it took away all the rights he or she acquired under the collective agreement. He also ignored other provisions of the collective agreement and paid lip service to the importance of seniority. Seniority is vital to employees, a cornerstone of the collective bargaining relationship. A long-established principle of labour law is that seniority can only be affected or altered by express language in an agreement. In light of that principle, the employer could not rely on its general authority in the management rights clause to deprive seniority employees of the rights they had al ready attained. Express language, not just the general management rights clause, is required to alter their seniority status and this language was not found in the collective agreement. Because of these errors in interpreting the agreement, the arbitrator produced a result that bordered on the absurd. It was patently unreasonable.

APPEAL by the employer from the judgment of the Divisional Court (MacFarland, McCombs and Wilson JJ.), reported at [2004] O.J. No. 895 (Div. Ct.), allowing an application by the union to quash an arbitration award.

Alberta Union of Provincial Employees v. Lethbridge Community College, [2004] 1 S.C.R. 727, [2004] S.C.J. No. 24, 2004 SCC 28, 238 D.L.R. (4th) 385, [2004] 7 W.W.R. 1, 26 Alta. L.R. (4th) 201, 348 A.R. 1, 11 Admin. L.R. (4th) 1, 319 N.R. 201; Voice Construction Ltd. v. Construction & General Workers' Union, Local 92, [2004] 1 S.C.R. 609, [2004] S.C.J. No. 2, 238 D.L.R. (4th) 217, 2004 SCC 23, [2004] 7 W.W.R. 411, 29 Alta. L.R. (4th) 1, 14 Admin. L.R. (4th) 165, 346, A.R. 201, 318 N.R. 332, not folld Other cases referred to Ajax (Town) v. National Automobile, Aerospace and Agricultural Implement Workers Union of Canada (C.A.W.-Canada), Local 222, 2000 SCC 23, [2000] 1 S.C.R. 538, [2000] S.C.J. No. 23, 47 O.R. (3d) 800n, 185 D.L.R. (4th) 618, 253 N.R. 223, 49 C.C.E.L. (2d) 151, 58 C.L.R.B.R. (2d) 154, 2000 C.L.L.C. 220-028; [page545] Canada (Director of Investigation and Research) v. Southam Inc., 1997 385 (SCC), [1997] 1 S.C.R. 748, [1996] S.C.J. No. 116, 144 D.L.R. (4th) 1, 209 N.R. 20, 71 C.P.R. (3d) 417; Canada Brick v. United Steelworkers of America, Local 225 (Holiday Pay Grievance), 2002 78973 (ON LA), [2002] O.L.A.A. No. 748, 111 L.A.C. (4th) 220; Canada Safeway Ltd. v. Retail, Wholesale and Department Store Union, Local 454, 1998 780 (SCC), [1998] 1 S.C.R. 1079, [1998] S.C.J. No. 47, 168 Sask. R. 104, 160 D.L.R. (4th) 1, 226 N.R. 319, 173 W.A.C. 104, [1999] 6 W.W.R. 453, 98 C.L.L.C. 220-042 (sub nom. Canada Safeway Ltd. v. RWDSU, Local 454); Canadian Union of Public Employees, Local 963 v. New Brunswick Li quor Corp., 1979 23 (SCC), [1979] 2 S.C.R. 227, 25 N.B.R. (2d) 237, 97 D.L.R. (3d) 417, 26 N.R. 341, 51 A.P.R. 237; Dayco (Canada) Ltd. v. National Automobile, Aerospace and Agricultural Implement Workers Union of Canada (C.A.W.-Canada), 1993 144 (SCC), [1993] 2 S.C.R. 230, [1993] S.C.J. No. 53, 13 O.R. (3d) 164n, 102 D.L.R. (4th) 609, 152 N.R. 1, 93 C.L.L.C. Â14,032; Elementary Teachers' Federation of Ontario v. Toronto District School Board, 2004 1652 (ON SCDC), [2004] O.J. No. 2886, 188 O.A.C. 302, 21 Admin. L.R. (4th) 1 (S.C.J.); Huron (County) Huronview Home for the Aged v. Service Employees' Union, Local 210, (2000), 2000 16893 (ON CA), 50 O.R. (3d) 766, [2000] O.J. No. 3928, 2001 C.L.L.C. 210-013 (C.A.) [Leave to appeal to S.C.C. refused [2000] S.C.C.A. No. 646]; T.C.F. of Canada Ltd. and Textile Workers' Union of America, Local 1332 (Re) (1972), 1972 2072 (ON LA), 1 L.A.C. (2d) 382 (Ont.); Toronto (City) Board of Education v. Ontario Secondary School Teachers' Federation, District 15, 1997 378 (SCC), [1997] 1 S.C.R. 487, [1997] S.C.J. No. 27, 144 D.L.R. (4th) 385, 208 N.R. 245, 25 C.C.E.L. (2d) 153; United Electrical Workers, Local 512, and Tung-Sol of Canada Ltd. (Re) (1964), 1964 1021 (ON LA), 15 L.A.C. 161; Volvo Canada Ltd. v. International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (U.A.W.), Local 720, 1979 4 (SCC), [1980] 1 S.C.R. 178, 33 N.S.R. (2d) 22, 99 D.L.R. (3d) 193, 27 N.R. 502, 57 A.P.R. 22, 79 C.L.L.C. para. 14,210 (sub nom. U.A.W. Local 720 v. Volvo Canada Ltd.) Statutes referred to Labour Relations Act, 1995, S.O. 1995, c. 1, Sch. A, s. 48(1) Authorities referred to Mullan, D.J."The View From North America: A Canadian Perspective on Three Troubling Issues" (2004), 17 Can. J. Admin. L. & Prac. 167 Mullan, D.J."Voice Construction -- One Swallow Does Not a Summer Make?" (2004), 11 C.L.E.L.J. 303

John E. Brooks and Megan E. Telford, for appellant Lakeport Beverages. Howard Goldblatt, for respondent Teamsters Local Union 938.

The judgment of the court was delivered by

LASKIN J.A.:--[page546]

Introduction

[1] The appellant Lakeport Beverages has a unionized workforce. The respondent Teamsters Local Union 938 represents the employees. Under the parties' collective agreement, employees who have completed their probationary period attain seniority, which gives them significant rights and benefits. The collective agreement also permits Lakeport to hire seasonal employees at lower wage rates and without any of the benefits given to seniority employees.

[2] In the fall of 2002, Lakeport laid-off 68 seniority employees because of a downturn in its business. In early 2003, it proposed to hire over 70 seasonal employees to meet increased summer demand. Lakeport told the union that it would recall seniority employees before hiring new employees, but proposed to recall the laid-off seniority employees as seasonal employees and pay them the seasonal employee wage rate. The union objected.

[3] Lakeport filed a policy grievance to resolve the dispute. Arbitrator Stephens concluded that Lakeport would not violate the collective agreement by recalling seniority employees as seasonal employees and paying them the lower wage rate. The union applied to quash the award. The Divisional Court granted the application. It held that the arbitrator's interpretation of the collective agreement was irrational, principally because the arbitrator mischaracterized "seasonal employee" as an employment classification under the collective agreement when, in fact, it was an employment status.

[4] Lakeport appeals with leave to this court. It raises two issues. First, is the applicable standard of review of the arbitrator's decision reasonableness or patent unreasonableness? Second, on the applicable standard, did the Divisional Court err in quashing the award? For the reasons that follow, I conclude that the applicable standard is patent unreasonableness. I also conclude that the arbitrator's decision was patently unreasonable, and therefore the Divisional Court did not err in quashing it.

Background

A. The collective agreement: Seniority employees and seasonal employees

[5] The facts giving rise to Lakeport's policy grievance are not in dispute. Lakeport operates a brewery in Hamilton where it produces its own brand of beer and co-packs products for other companies.

[6] Teamsters is the bargaining agent for all Lakeport employees, except office staff, sales staff, supervisors and those above the rank of supervisor. In July 2000, Lakeport and the union [page547] signed a five-year collective agreement. This agreement governs the dispute between the parties.

[7] Under the collective agreement, new employees at Lakeport must work a probationary period of 480 hours within a 12-month period in order to attain seniority. Seniority employees enjoy the full range of benefits under the collective agreement, including entitlement to a comprehensive health and welfare plan, the right to be recalled from layoff to perform available work, the right to apply for posted jobs, the right to be disciplined or discharged only for just cause and the right to access grievance and arbitration procedures.

[8] Lakeport's business fluctuates during the year. To enable the company to respond to these fluctuations, Article 20.02 of the collective agreement permits Lakeport to hire seasonal employees during its busy seasons, which fall between April 1 and September 15, and between November 15 and December 31 each year. Typically, seasonal employees are hired to work in positions that are already occupied by seniority employees and that fall within classifications set out in the collective agreement, such as "machine operator""filler operator", or "brew house operator". Article 20.02(b) expressly provides that seasonal employees are not hired with the intent of becoming seniority employees. More significantly, under the collective agreement, seasonal employees are not entitled to any of the rights and benefits accorded seniority employees, and are paid wage rates ranging from $7 and $14 per hour less than seniority employees, even though they perform the same type of work.

B. The layoffs and the policy grievance

[9] In the summer of 2002, for legitimate business reasons, Lakeport did not hire seasonal employees. Seniority employees continued to do all the company's work throughout the summer. In September 2002, however, Lakeport's business slowed down. It laid-off 68 seniority employees.

[10] In early 2003, Lakeport announced that it would likely need to hire 77 seasonal employees to meet its anticipated increased summer demand. Lakeport told the union that it proposed to recall the laid-off seniority employees before hiring new employees, but that during the recall period it would treat these laid-off employees as seasonal employees. The union objected. It contended that seniority employees could not be recalled to be paid seasonal employee wage rates and deprived of their rights under the collective agreement.

[11] To resolve this dispute, in March 2003, Lakeport filed a policy grievance. It asked the arbitrator to resolve two issues. First, because there was no available full-time work for laid-off [page548] employees, could Lakeport recall laid- off full-time employees as seasonal employees, and offer them the seasonal employee wage rate of $13 per hour? Second, did the collective agreement allow the company to hire seasonal employees, as contemplated by the collective agreement, while there were full-time employees already on layoff? The first issue became the focus of the arbitration.

C. The arbitrator's decision

[12] The arbitrator gave his award in May 2003. On the first issue in the policy grievance, he concluded that under the collective agreement Lakeport was entitled to recall the laid- off seniority employees as seasonal employees at the seasonal employee wage rate. In reaching this conclusion, the arbitrator made three important findings.

[13] First, and critical to his decision, he rejected the union's argument that "seasonal employee" was a type of employment status; instead, he found that it was a separate employment classification. He held that Lakeport had the right to classify employees under the management rights provision in the agreement (Article 4.01), and that no other provision of the agreement precluded Lakeport from defining classifications as it saw fit. Although Article 10 of the collective agreement gave laid-off employees the right to be recalled, it did not "stipulate a right to recall to any specific classification or at any specific rate of pay". Therefore the arbitrator held that Lakeport would not violate any provision of the collective agreement by recalling seniority employees as seasonal employees for the period between June and August 2003.

[14] Second, the arbitrator found that Lakeport's proposal would not breach Article 20.02 of the collective agreement because Lakeport did not intend that these seasonal employees become seniority employees. Instead, they would be hired for the summer period as stipulated in Article 20.02(a).

[15] Third, the arbitrator found no evidence of bad faith on the part of the employer. The evidence showed that the 68 employees in question had been laid-off because of a downturn in the economy. However, the arbitrator noted that if Lakeport were to engage in this practice every summer, its actions would raise a possible violation of Article 20.02(f), which provides that "seasonal employees shall not displace seniority or probationary employees".

[16] The arbitrator does not appear to have expressly considered the second issue in the policy grievance: whether the collective agreement permits Lakeport to hire seasonal employees while seniority employees are on layoff. In his award, however, he seems to have accepted that Lakeport could do so. He noted that [page549] seasonal employee positions could be created and posted at the employer's discretion so long as the conditions in Article 20.02 were met. He also found that using seasonal employees as Lakeport intended to do would not "displace" any seniority employees. This was because, in the arbitrator's view"displaced" in Article 20.02(f) means removing a seniority employee from a position he or she currently occupies.

[17] The arbitrator summarized his findings in the following passage from his award:

As a result, I find that the employer has a right to create positions within the seasonal employee classification while seniority employees are laid-off, and to pay employees in the positions, including any seniority rated employees who are recalled to such positions, the wage rate of the seasonal employee classification as set out in Article 20.01.

[18] Nonetheless, the arbitrator concluded by noting that he had made no finding "on the interplay between seniority rights and any other conditions of employment" and more specifically on "how seniority rated employees in the seasonal employee classification would be treated with respect to seniority, benefits, or other terms of employment aside from wages". He therefore said that he remained seized of the matter to deal with any issues arising out of the implementation of his decision.

D. The Divisional Court's decision

[19] In a brief endorsement, the Divisional Court quashed the arbitrator's award. The court held that "seasonal employee" was a job status, not, as the arbitrator held, a job classification. Moreover, as laid-off seniority employees have the right to be recalled to perform available work, it could not have been the parties' intention that they be paid as seasonal employees during the busy time of the year, absent express language to that effect. In the Divisional Court's view, it was a "clearly irrational" interpretation of the collective agreement to read it so that seniority employees who enjoyed the full benefit of the collective agreement were converted into seasonal employees who received no protection at all.

Discussion

First issue: What is the applicable standard of review?

[20] In this case the arbitrator was required to interpret the provisions of a collective agreement. Under s. 48(1) of Ontario's Labour Relations Act, 1995, S.O. 1995, c. 1, Sch. A, his decision is "final and binding". For many years, both the Supreme Court of Canada and this court have held that where Ontario labour [page550] arbitrators are called on to interpret provisions of a collective agreement their decisions are reviewable on a standard of patent unreasonableness. See for example: Volvo Canada Ltd. v. International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (U.A.W.), Local 720, 1979 4 (SCC), [1980] 1 S.C.R. 178, 99 D.L.R. (3d) 193; Dayco (Canada) Ltd. v. National Automobile, Aerospace and Agricultural Implement Workers Union of Canada (C.A.W.-Canada), 1993 144 (SCC), [1993] 2 S.C.R. 230, [1993] S.C.J. No. 53; Ajax (Town) v. National Automobile, Aerospace and Agricultural Implement Workers Union of Canada (C.A.W.-Canada), Local 222, 2000 SCC 23, [2000] 1 S.C.R. 538, [2000] S.C.J. No. 23; Huron (County) Huronview Home for the Aged v. Service Employees' Union, Local 210, (2000), 2000 16893 (ON CA), 50 O.R. (3d) 766, [2000] O.J. No. 3928 (C.A.), leave to appeal to S.C.C. refused [2000] S.C.C.A. No. 646. Both courts have so held when there were only two standards of review -- correctness and patent unreasonableness -- and after the Supreme Court's decision in Canada (Director of Investigation and Research) v. Southam Inc., 1997 385 (SCC), [1997] 1 S.C.R. 748, [1996] S.C.J. No. 116, in which the court introduced the intermediate standard of reasonableness.

[21] In Canada Safeway Ltd. v. Retail, Wholesale and Department Store Union, Local 454, 1998 780 (SCC), [1998] 1 S.C.R. 1079, [1998] S.C.J. No. 47, at para. 58, Cory and McLachlin JJ. explain the rationale for this highly deferential approach:

This high degree of curial deference is essential to maintain the integrity of the system which has grown to be so efficient and effective in the resolution of disputes arising in the sensitive field of labour relations. The nature of labour disputes requires their speedy resolution by expert tribunals.

[22] Last year, however, in two cases from Alberta -- Voice Construction Ltd. v. Construction & General Workers' Union, Local 92, 2004 SCC 23, [2004] 1 S.C.R. 609, [2004] S.C.J. No. 2 and Alberta Union of Provincial Employees v. Lethbridge Community College, 2004 SCC 28, [2004] 1 S.C.R. 727, [2004] S.C.J. No. 24 -- the Supreme Court adopted a standard of reasonableness instead of patent unreason-ableness for reviewing decisions of labour arbitrators acting under Alberta's Labour Relations Code, S.A. 1988, c. L- 12, and the Act as amended by R.S.A. 2000, c. L-1.

[23] Not surprisingly, the union argues that the arbitrator's decision should be quashed whatever deferential standard is applied. However, the union also contends that these two Alberta cases, though decided in the context of a different legislative regime, signal a less deferential approach to the review of Ontario labour arbitration decisions. It contends that we should [page551] apply a standard of reasonableness for reviewing the arbitrator's award.

[24] Support for the union's contention may be found in the Divisional Court's recent judgment in Elementary Teachers' Federation of Ontario v. Toronto District School Board, 2004 1652 (ON SCDC), [2004] O.J. No. 2886, 188 O.A.C. 302 (S.C.J.) decided shortly after the two Alberta cases. In Elementary Teachers, the Divisional Court held that the proper standard of review of an arbitrator's decision interpreting both a collective agreement and the Ontario Employment Standards Act is reasonableness. Writing for the court (at para. 13), Swinton J. read Voice Construction as a sign that the Supreme Court "appears to have departed from the long line of cases in which the standard for review of an arbitrator's interpretation of the collective agreement was patent unreasonableness".

[25] Lakeport, on the other hand, submits that Voice Construction and Lethbridge Community College have not changed the standard of review in Ontario, certainly not the standard for reviewing this arbitrator's decision. It argues that the Alberta cases can be distinguished on the basis of the different judicial review provisions of the Alberta and Ontario statutes. I agree with Lakeport's submission.

[26] The Alberta cases reaffirmed -- if reaffirmation were needed -- that the overriding question is the "extent of judicial review that the legislature intended for a particular decision of the administrative tribunal". The Alberta cases also reaffirmed that to answer that question the court must invoke a "pragmatic and functional approach" and apply the following four well-established contextual factors: the presence or absence of a privative clause or a statutory right of appeal; the expertise of the tribunal relative to the expertise of the reviewing court on the questions at issue; the purpose of the legislation and of the particular provision; and the nature of the question at issue. To determine the legislature's intent, all four factors must be taken into account; no one factor is determinative.

[27] The application of these four factors shows a legislative intent to maintain a highly deferential standard of review of Arbitrator Stephens' decision. First, as has historically been the case in Ontario, his decision is protected by a reasonably strong privative clause. Section 48(1) of the Labour Relations Act, supra, provides for "final and binding" arbitration and the Act contains no express right of judicial review or appeal. Although not a full privative clause, s. 48(1) does signal a large measure of deference to the arbitrator's decision. [page552]

[28] Second, the interpretation of a provision of a collective agreement lies at the heart of an arbitrator's expertise, an expertise ordinarily greater than that of courts. This factor, therefore, weighs heavily in favour of deference.

[29] Third, the purpose of s. 48(1) of the Act -- the grievance and arbitration provision -- is to secure the prompt, efficient and cost-effective settlement of disputes arising out of an interpretation and application of a collective agreement. This purpose can best be achieved with minimal interference from the courts. The issue in this case is precisely the kind of issue that warrants minimal interference. The arbitrator was required to interpret the relevant provision of the collective agreement, and thus was required to decide a question squarely within his jurisdiction. In Toronto (City) Board of Education v. Ontario Secondary School Teachers' Federation, District 15, 1997 378 (SCC), [1997] 1 S.C.R. 487, [1997] S.C.J. No. 27, at paras. 35-37, Cory J. emphasized the reasons why a highly deferential standard of review should be applied to an arbitrator's interpretation of the provisions of a collective agreement:

The field of labour relations is sensitive and volatile. It is essential that there be a means of providing speedy decisions by experts in the field who are sensitive to the situation, and which can be considered by both sides to be final and binding.

In particular, it has been held that the whole purpose of a system of grievance arbitration is to secure prompt, final and binding settlement of disputes arising out of the interpretation or application of collective agreements ... This is a basic requirement for peace in industrial relations, which is important to the parties and society as a whole ...

It was for these reasons that PSAC No. 2 stressed that decisions of labour tribunals acting within their jurisdiction can only be set aside if they are patently unreasonable. That is very properly an extremely high standard, and there must not be any retreat from this position.

[30] Finally, the nature of the question in issue in this case points to a highly deferential standard of review. Here, the arbitrator was required to apply his interpretation of the provisions of the collective agreement to the facts of this case. His decision has little precedential value. It did not require him to determine a question of law or fact going to his jurisdiction, a question of law or fact concerning the interpretation of an external statute, or a general question of law.

[31] On my assessment of the four contextual factors, patent unreasonableness remains the appropriate standard of review.

[32] What then of the Alberta cases? I think that they are largely explained by the relatively weak privative clause in the Alberta statute. Section 142 of the Alberta Labour Relations Code [page553] states merely that an arbitrator's decision is "binding", and s. 143(2) expressly stipulates that an arbitrator's decision is open to judicial review if notice is filed with the court within 30 days after the date of the award. By contrast, although the "final and binding" clause in s. 48(1) of the Ontario statute is not the strongest privative clause imaginable, it does provide more protection than its counterpart in s. 142 of the Alberta Code. And the Ontario Act has no provisions comparable to s. 143(2) of the Alberta Code expressly permitting judicial review.

[33] I conclude that the Supreme Court's decisions in Voice Construction and Lethbridge Community College do not alter the standard of review applicable to the arbitrator's decision in this case. The standard remains patent unreasonableness. In my view, until we have a clear statement from the Supreme Court of Canada, we should not depart from a highly deferential standard of review of decisions of Ontario labour arbitrators -- a standard of review that harkens back to Dickson J.'s seminal decision in Canadian Union of Public Employees, Local 963 v. New Brunswick Liquor Corp., 1979 23 (SCC), [1979] 2 S.C.R. 227, 97 D.L.R. (3d) 417, and that has served the labour relations community in this province so well for over a quarter of a century.

[34] I am comforted in this conclusion by the similar views of David Mullan, one of the country's pre-eminent administrative law scholars. Professor Mullan has recently written that it would be "premature to lament the passing of an era of deference". "More particularly", he wrote"I believe that that cannot be justified at least until such time as the Court applies a reasonableness standard of review to the interpretation of a collective agreement by a labour arbitrator in another jurisdiction and not subject to the kind of explicit review regime established in the Alberta Labour Relations Code". See David J. Mullan"The View From North America: A Canadian Perspective on Three Troubling Issues", 17 Can. J. Admin. L. &. Prac. 167 at 188-90; see also Mullan"Voice Construction -- One Swallow Does Not a Summer Make?" (2004), 11 C.L.E.L.J. 303.

[35] I will therefore consider the arbitrator's decision against a standard of review of patent unreasonableness.

Second issue: Was the arbitrator's interpretation of the collective agreement patently unreasonable?

[36] The principal issue before the arbitrator was the first issue in the policy grievance, whether Lakeport could recall laid-off seniority employees as seasonal employees and pay [page554] them the seasonal employee wage rate of $13 per hour. Indeed, the union says that this was the only issue before the arbitrator because on the second issue -- whether under the collective agreement the company could hire seasonal employees while seniority employees were on layoff -- Lakeport had agreed that seniority employees were entitled to be recalled when there was work available. The union's view of the focus of the grievance is supported by the tenor of the arbitrator's award and by the Divisional Court's endorsement. I too will focus on this first issue in the grievance, but will also comment briefly on the second issue.

[37] Lakeport submits that although the arbitrator's interpretation of the collective agreement may have been unpalatable to the union, it was not patently unreasonable. Article 20.01 of the agreement, Lakeport argues, expressly provides that "seasonal employee" is a classification. The arbitrator therefore adopted a reasonable interpretation of the collective agreement by holding that seasonal employee is a job classification, and that the management rights clause does not restrict the employer's right to classify employees. Lakeport submits that in quashing the award, the Divisional Court erroneously substituted its opinion for that of the arbitrator and ignored the plain language of the collective agreement.

[38] I cannot accept Lakeport's submission. In my view, the arbitrator mischaracterized "seasonal employee" as a job classification and effectively rewrote Article 20 to do so. He also ignored other provisions of the collective agreement and paid lip service to the importance of seniority. Because of these errors in interpreting the agreement, the arbitrator produced a result that borders on the absurd. It is thus patently unreasonable.

[39] As I have said, the critical finding of the arbitrator on which his award rested was his conclusion that "seasonal employee" is an employment classification. Because a laid-off employee has no right to be recalled to any particular classification, the arbitrator held that a seniority employee could be recalled to work as a seasonal employee in the same way that, for example, a "machine operator" could be recalled to work as a "stationary engineer". In so holding, the arbitrator relied on Article 20, titled"Wage Rates and Classifications", and on the accompanying chart in Article 20.01. [page555]

Article 20

WAGE RATES AND CLASSIFICATIONS S. 20.01

Classification

Jan. 1, Feb 1, Feb 1, Feb 1, Feb 1, 2000 2001 2002 2003 2004

Machine Operator/ $20.05 $20.55 $21.10 $21.65 $22.65 Packaging

Filler Operator $20.30 $20.80 $21.35 $21.90 $22.90

Shipper-Receiver/ $20.05 $20.55 $21.10 $21.65 $22.65 Machine Operator/ Warehouse

Brew House $20.55 $21.05 $21.60 $22.15 $23.15 Operator

Plant Oiler $20.55 $21.05 $21.60 $22.15 $23.15

Stationary $22.55 $23.05 $23.60 $24.15 $25.15 Engineer/ Maintenance

Licensed Mechanic/ $23.55 $24.05 $24.60 $25.15 $26.15 Maintenance

Licensed $24.55 $25.05 $25.60 $26.15 $27.15 Electrician/ Mechanic

Probationary Employees $4.00 Below Regular Rate

Seasonal $13.00 $13.00 $13.00 $13.00 $13.00 Employees

Laboratory $20.55 $21.05 $21.60 $22.15 $23.15 Technicians

*Effective at time of ratification

[40] On its face, it strikes me as odd that one could equate a "seasonal employee" with, for example, a "machine operator" or a "stationary engineer", because seasonal employees are hired to do the job of a machine operator or a stationary engineer. The title in the chart may lend a superficial plausibility to the arbitrator's characterization of "seasonal employee" as a separate job classification, but it cannot be considered in isolation. Rather, the chart, including its title, must be interpreted in the context of all of Article 20.

[41] When the chart in Article 20.01 is read together with the provisions regarding seasonal employees in Article 20.02, I think it is obvious that the chart lists wage rates based both on classification and status, that seasonal employees -- like probationary employees -- are an employment status, not an employment classification, and that seniority employees cannot be recalled as seasonal employees. In holding otherwise, the arbitrator interpreted parts of Article 20.02 contrary to its plain words, and effectively rewrote other parts of it. Article 20.02 states that: [page556]

(a) A seasonal employee is one who is hired during the period April 1st up to and including September 15th in each year and from November 15th to December 31st.

(b) Seasonal employees are not hired with the intent of becoming seniority employees.

(c) The provisions of the Collective Agreement which apply to seasonal employees are wages and payment of Union dues.

(d) Seasonal employees are entitled to all payments required by law and have no claim to the benefits, etc. available to seniority employees.

(e) Seasonal employees may be given the opportunity should full-time employment become available provided they have completed the four hundred and eighty (480) hours of work with the Company in the year. In that circumstance the employee will not have to complete the four hundred and eighty (480) hours probationary period to obtain seniority as provided in clause 8.02. The actual date of hire as a full-time employee shall be the employee's seniority date.

(f) Seasonal employees shall not displace seniority or probationary employees.

[42] In Article 20.02, the parties recognized that during its two potentially busy periods, Lakeport could temporarily hire extra employees without giving them all the rights and benefits in the collective agreement enjoyed by regular employees. However, Article 20.02 cannot apply to employees who have already attained seniority and whose terms of employment are already covered by the collective agreement. This is evident from each of the subsections of Article 20.02.

[43] Article 20.02(a) provides that a seasonal employee is one who is "hired" for specified periods during the summer or winter months. However, a seniority employee would not be "hired" for these periods; he or she would have been hired months or years earlier. Unless the language of the collective agreement provides otherwise, a layoff does not terminate the employment relationship, thereby making a laid-off employee eligible to be "rehired". See T.C.F. of Canada Ltd. and Textile Workers' Union of America, Local 1332 (Re) (1972), 1972 2072 (ON LA), 1 L.A.C. (2d) 382 (Ont.), at pp. 384-85, and Canada Brick v. United Steelworkers of America, Local 225 (Holiday Pay Grievance), 2002 78973 (ON LA), [2002] O.L.A.A. No. 748, at paras. 31-34.

[44] Under this collective agreement, the employment relationship can only be terminated in accordance with the conditions set out in Article 9.

Section 9.01

Seniority shall cease and employment shall be terminated for any of the following reasons:

(a) If an employee quits; [page557]

(b) If an employee is absent from work for two (2) or more consecutive working days without having notified the Company and received permission to be absent in advance where that is possible;

(c) If an employee has been laid-off and fails to report for work within seven (7) days after written notice to report to work has been mailed to his last address registered with the Company, provided that when an employee is recalled to work and does not report within forty-eight (48) hours, the Company may recall the next qualified employee in line, but he is subject to being displaced if the first employee recalled does report within seven (7) days;

(d) If an employee has been discharged for just cause and is not reinstated due to the Grievance or Arbitration Procedure;

(e) In case of layoff for a period of twelve (12) months or equal to his seniority if less than twelve (12) months.

[45] None of the conditions set out in Article 9 had occurred when Lakeport sought to recall the laid-off seniority employees as seasonal employees. Therefore, these seniority employees had an ongoing employment relationship with Lakeport at the time of recall. To reach the arbitrator's result requires rewriting Article 20.02(a) to read "a seasonal employee is one who is hired or recalled" (emphasis added).

[46] Further, relying on Article 20.02(b), the arbitrator held that in recalling the laid-off seniority employees as seasonal employees"there is no intention that such employees will become seniority employees". This holding makes no sense because the laid-off employees already were seniority employees. Indeed, Article 20.02(b) emphasizes that the parties never contemplated, much less agreed, that recalled seniority employees could be reclassified as seasonal employees.

[47] Moreover, Article 20.02(c) and (d) stipulate that seasonal employees are not entitled to the benefits given to seniority employees under the collective agreement. These provisions reinforce the conclusion that employees who have already attained seniority and already have rights and benefits under the collective agreement do not fit the concept of "seasonal employee" in Article 20.02.

[48] The arbitrator appears to have ignored Article 20.02(c) and (d), because while he allowed Lakeport to recall seniority employees at the seasonal employee wage rate, he remained seized of issues that may arise pertaining to seniority or other benefits. Article 20.02(c) and (d), however, stipulates that not only are seasonal employees to be paid at a lower wage rate, they are not entitled to any other rights or benefits under the collective agreement. In short, on the arbitrator's interpretation of the collective agreement, there was nothing for him to remain seized of, because once the seniority employees were recalled as seasonal employees, they had no seniority or benefits to protect. [page558]

[49] The arbitrator also appears to have rewritten Article 20.02(e), which gives seasonal employees an opportunity to become full-time employees once they have completed 480 hours of work in the year. In that case, a seasonal employee need not work a probationary period. This subsection cannot possibly apply to seniority employees, because by definition they have already worked the probationary period of 480 hours within a year. To reach the arbitrator's result requires rewriting Article 20.02(e) to read"In that circumstance the employee will not have to complete . . . a second probationary period . . ." (emphasis added).

[50] Finally, in holding that Lakeport had the right to recall laid-off seniority employees as seasonal employees, the arbitrator seemed to rely on Article 20.02(f), which precludes seasonal employees from displacing seniority employees. However, Article 20.02(f) does not confer rights; it merely limits Lakeport's right to hire seasonal employees.

[51] Overall, Article 20.02 demonstrates that "seasonal employee" is an employment status, not an employment classification, and that laid-off seniority employees cannot be recalled as seasonal employees. Unquestionably, laid-off seniority employees could be recalled to a different job classification and paid the rate corresponding to that classification. For example, a brewhouse operator paid $22.15 an hour before being laid-off could be recalled to the classification of filler operator and paid $21.90 an hour. But this does not have the effect of transforming the employee's job status and depriving that employee of previously acquired collective agreement rights. The arbitrator's interpretation does not merely change a seniority employee's job classification. It takes away all the rights he or she acquired under the collective agreement.

[52] If the arbitrator was correct in holding that seasonal employee is an employment classification then so too is probationary employee. And yet that would mean seniority employees could be recalled to fill positions in a probationary classification even though they had already passed their probationary period and the parties had never before treated probationary employees as a classification. Respectfully, this would be an absurd result.

[53] It is not just Article 20.02 that undermines the arbitrator's characterization of seasonal employee as a job classification; other provisions of the agreement do so as well. The agreement should be looked at as a whole. And yet the arbitrator appears not to have considered other relevant articles, especially Articles 8 and 9.

[54] Article 8 addresses seniority and gives employees who have completed their probationary period seniority rights from "the date of hire". Under the arbitrator's decision, recalled [page559] seniority employees lose their seniority rights. He has thus effectively read Article 8 out of the agreement.

[55] As I have noted, Article 9 deals with the termination of seniority. Article 9.01, which I have already reproduced, does not give the employer the authority to terminate an employee's seniority by reclassifying the employee as a seasonal employee. The arbitrator's decision effectively rewrote Article 9.01 to create an additional circumstance in which seniority may be terminated.

[56] Finally, although in his decision the arbitrator referred to the importance of seniority, in my respectful view he paid no more than lip service to it. Seniority, of course, is vital to employees, a cornerstone of the collective bargaining relationship. A long-established principle of labour law is that seniority can only be affected or altered by express language in the agreement. Arbitrator Reville put it this way in United Electrical Workers, Local 512, and Tung-Sol of Canada Ltd. (Re) (1964), 1964 1021 (ON LA), 15 L.A.C. 161, at p. 162:

Seniority is one of the most important and far-reaching benefits which the trade union has been able to secure for its members by virtue of the collective bargaining process. An employee's seniority under the terms of a collective agreement gives rise to such important rights as relief from lay-off, right to recall to employment, vacations and vacation pay, and pension rights, to name only a few. It follows, therefore, that an employee's seniority should only be affected by very clear language in the collective agreement concerned and that arbitrators should construe the collective agreement with the utmost strictness wherever it is contended that an employee's seniority has been forfeited, truncated or abridged under the relevant sections of the collective agreement.

(Emphasis added)

[57] In the light of this principle, Lakeport cannot rely on its general authority in the management rights clause to deprive seniority employees of the rights they have already attained. Express language, not just the general management rights clause, would be required to alter their seniority status. No such language can be found in this collective agreement.

[58] In summary, the arbitrator's decision permits Lakeport to recall seniority employees and "classify" them as seasonal employees. Thus the decision permits Lakeport to convert seniority employees with collective agreement rights into seasonal employees with no rights. These seniority employees would be recalled to perform work they had performed before their lay off, yet paid $7-$14 per hour less to do so, and without any of the rights and benefits they had acquired under the collective agreement. The Divisional Court concluded that this was an irrational interpretation of the collective agreement. I agree. This is not a case where the arbitrator chose between two [page560] reasonable interpretations of the collective agreement. Even on a highly deferential standard of review, the arbitrator's decision on this first issue cannot stand. It is patently unreasonable to interpret the collective agreement to permit Lakeport to recall laid-off seniority employees as seasonal employees.

[59] I turn briefly to the second issue in the policy grievance: whether Lakeport was entitled to hire seasonal employees while seniority employees were laid-off. Lakeport submits that the arbitrator answered this question affirmatively and that his answer is not patently unreasonable. Indeed, Lakeport submits that the only limit in the collective agreement on its right to hire seasonal employees during the two specified periods is found in Article 20.02(f): "seasonal employees shall not displace seniority or probationary employees". Lakeport argues that the arbitrator's interpretation of "displace" to refer only to active employees, not to laid-off employees, was reasonable.

[60] I suspect that the union is correct in asserting that the second issue was not a "live" issue before the arbitrator or in the Divisional Court. Both sets of reasons seem to assume that if work were available, seniority employees would be recalled, leaving only the question whether they would be recalled as seniority employees or seasonal employees.

[61] However, even if the second issue had been a live issue before the arbitrator, his narrow interpretation of "displace" to refer only to seniority employees actively working at Lakeport seems to make little sense. Lakeport's workforce is seniority rated, and laid-off seniority employees still have an employment relationship with Lakeport. Hiring seasonal employees to the prejudice of laid-off seniority employees amounts to displacing these seniority employees. I agree with the union that Lakeport could hire seasonal employees while there were laid-off seniority employees only if these laid-off employees had been recalled and failed to report to work in accordance with Article 9.

Conclusion

[62] In my view, the collective agreement does not permit Lakeport to recall seniority employees as seasonal employees. The arbitrator's interpretation of the agreement, permitting it to do so, was patently unreasonable. I would therefore dismiss the appeal. The union is entitled to its costs of the appeal, which I would fix in the amount agreed on by counsel, $15,000 inclusive of the motion for leave to appeal and of disbursements and GST.

Appeal dismissed.