Marianhill Inc. v. Canadian Union of Public Employees, Local 2764

97 O.R. (3d) 305

Court of Appeal for Ontario,

O'Connor A.C.J.O., Simmons and Lang JJ.A.

June 30, 2009

Employment -- Labour relations -- Collective agreement -- Arbitrator finding that collective agreement was ambiguous on issue of whether part-time employees were entitled to be paid holiday pay for statutory holidays not worked -- Arbitrator taking extrinsic evidence into account and resolving ambiguity in union's favour -- Arbitrator's decision reasonable.

An arbitrator was appointed to interpret a provision of a collective agreement relating to the entitlement of part-time employees to be paid holiday pay for statutory holidays not worked. The arbitrator found that the provision was ambiguous. He took extrinsic evidence into account and resolved the ambiguity in the Union's favour. The Divisional Court found that the provision was not ambiguous. It quashed the award. The Union appealed.

Held, the appeal should be allowed.

The arbitrator's decision interpreting the collective agreement was to be reviewed on a standard of reasonableness. The effect of the arbitrator's decision was not to amend the collective agreement, so that the Divisional Court was entitled to review it on a standard of correctness. The conclusion that the agreement was ambiguous was within the range of possible, acceptable outcomes which were defensible in respect of the facts and law. The decision was reasonable.

APPEAL from the order of the Divisional Court (Cunninghan A.C.J.S.C.J., McCartney R.S.J. and Hambly J.), [2008] O.J. No. 4098 (S.C.J.) quashing the award of an arbitrator.

Cases referred to Dunsmuir v. New Brunswick, [2008] 1 S.C.R. 190, [2008] S.C.J. No. 9, 2008 SCC 9, 329 N.B.R. (2d) 1, 64 C.C.E.L. (3d) 1, 164 A.C.W.S. (3d) 727, EYB 2008-130674, J.E. 2008-547, [2008] CLLC Â220-020, 170 L.A.C. (4th) 1, 372 N.R. 1, 69 Imm. L.R. (3d) 1, 291 D.L.R. (4th) 577, 69 Admin. L.R. (4th) 1, 95 L.C.R. 65, apld Other cases referred to John Bertram & Sons Co. v. International Association of Machinists, Local 1740 (Greenwood Grievance), 1967 CanLII 1039 (ON LA), [1967] O.L.A.A. No. 2, 18 L.A.C. 362; Noranda Metal Industries Ltd., Fergus Division v. International Brotherhood of Electrical Workers, Local 2345 (1983), 1983 CanLII 1690 (ON CA), 44 O.R. (2d) 529, [1983] O.J. No. 3280, 1 O.A.C. 187, 84 CLLC Â14,024 at 12093, 23 A.C.W.S. (2d) 136 (C.A.) [page306] Statutes referred to Employment Standards Act, 2000, S.O. 2000, c. 41

James K. McDonald, for appellant. Stephen Bird, for respondent.

BY THE COURT: -- Overview

[1] The Canadian Union of Public Employees, Local 2764 (the "Union") appeals, with leave, the decision of the Divisional Court. In reasons written by Cunningham A.C.J.S.C.J., the Divisional Court quashed the award of Arbitrator Richard Brown, who had been appointed to interpret a provision of a collective agreement between the Union and Marianhill Inc. (the "Employer").

[2] The main issue to be determined on the arbitration was whether part-time employees were entitled, under the terms of the applicable collective agreement, to be paid holiday pay for statutory holidays not worked. [See Note 1 below] The arbitrator found that the agreement was ambiguous. Taking into account extrinsic evidence, he resolved the ambiguity in the Union's favour. The Divisional Court disagreed that the agreement was ambiguous and quashed the arbitrator's award. Background

[3] Although the grievance giving rise to the arbitration arose under the 2004-2005 collective agreement, the arbitrator described the "crux of the dispute" as "the proper interpretation of the 2001-2004 collective agreement". He said that the parties argued the arbitration on "the assumption that subsequent contracts mean the same thing as the 2001-2004 agreement".

[4] However, as no formal collective agreement was ever signed for the 2001-2004 period, the arbitrator determined that [page307] a signed July 19, 2001 memorandum of agreement ("MOA") constituted the 2001-2004 Collective Agreement. The parties do not dispute that finding.

[5] The preamble to the MOA stated that "the said Collective Agreement shall include the terms of the previous Collective Agreement which expires on August 31, 2001, provided, however, that the amendments below be incorporated".

[6] Appendix 6 to the MOA, which was the Employer's last monetary offer of settlement, was one of the amendments. Article 1 of Appendix 6 reads as follows:

1. Guaranteed Hours

Both letters of Agreement for guaranteed hours to be renewed (estimated cost -- 3% of total payroll) and put in Collective Agreement and new language for article 19.02 part time to meet new Employment Standards Act.

[7] Although Appendix 6 refers to "both" letters of agreement for guaranteed hours, there is some disagreement as to whether there was more than one letter of agreement that referred to guaranteed hours. [See Note 2 below] However, it is common ground that Article 1 refers, at least, to a letter of agreement dated November 28, 1997 relating to the 1997-1999 and 1999-2001 collective agreements. It states in part:

The Union and Management agree to the following guaranteed hours in exchange for the stat qualified Article 19:02 for part-time employees only.

[8] Article 19:02 of the 1997-1999 and 1999-2001 collective agreements was entitled "Pay for Regularly Scheduled Work on a Paid Holiday". Article 19:02(a) stated that "[a] part-time employee who is scheduled to work on" one of the listed statutory holidays "[s]hall be paid at the rate of time and one-half (1 1/2) times regular rate for each hour worked on the above holiday". Article 19:02(b) provided that "[a] part-time employee who does not work on a paid holiday named in 19:02(a) and who does not qualify for the holiday pay as set out in 19:02(a) shall not be entitled to a holiday pay".

[9] The arbitrator determined that Appendix 6 to the MOA was ambiguous. Relying on evidence extrinsic to the wording of the MOA to resolve the ambiguity, the arbitrator concluded [page308] that the employees were entitled to the holiday pay for statutory holidays.

[10] Stating that it was applying a reasonableness standard of review, the Divisional Court disagreed with the arbitrator's conclusion and concluded instead that the wording of Appendix 6 was clear and unambiguous. On that basis, it set aside the arbitrator's decision.

[11] For the reasons that follow, it is our view that the Divisional Court erred in quashing the arbitrator's decision. Analysis

[12] We agree with the Divisional Court that the arbitrator's decision interpreting the collective agreement is to be reviewed on a standard of reasonableness. The proper approach to the reasonableness standard of review is as set out in Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190, [2008] S.C.J. No. 9, at para. 47:

Tribunals have a margin of appreciation within the range of acceptable and rational solutions. A court conducting a review for reasonableness inquires into the qualities that make a decision reasonable, referring both to the process of articulating the reasons and to outcomes. In judicial review, reasonableness is concerned mostly with the existence of justification, transparency and intelligibility within the decision-making process. But it is also concerned with whether the decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law.

[13] We reject the Employer's submission that the effect of the arbitrator's decision was to amend the collective agreement and that, as such, the Divisional Court was entitled to review it on a standard of correctness. The case was argued before the arbitrator and the Divisional Court as one relating to the ambiguity in Appendix 6 of the MOA. In our view, the issue here is properly characterized as one of ambiguity. The arbitrator's decision resolved the ambiguity and the decision did not purport to, or in effect, amend the collective agreement.

[14] In reaching the decision that Appendix 6 was ambiguous, the arbitrator said the following:

The union contends this paragraph indicates employees were to be paid for statutory holidays. According to this line of argument, this provision indicates the employer was agreeing to bear a cost of 3%, and [the employer's human resources representative at the time] had stated this was the cost of providing holiday pay. The employer notes the MOA [page309] continued the terms of the previous agreement except where the parties agreed to amend it. The employer also notes the reference to 3% appears in the middle of the language dealing with guaranteed hours, rather than in the subsequent wording about holidays. (No evidence was led as to the actual cost, if any, of guaranteed hours, but the employer does concede 3% is the approximate cost of eight statutory holidays.) The employer also notes that the MOA called for the renewal of the letter of understanding about guaranteed hours and the letter being renewed, as set out in the previous agreement, says the guarantee was given "in exchange" for statutory holiday pay.

There is some force to the argument made by each party about the meaning of the MOA. In my view, the wording of this document does not clearly indicate whether employees are entitled to statutory holiday pay in addition to the payment in lieu of benefits.

[15] In our view, these paragraphs reflect the arbitrator's reasoning process leading to the conclusion that the language of Appendix 6 is ambiguous. His reasons meet the transparency and intelligibility requirements set out in Dunsmuir. Moreover, his conclusion that the agreement is ambiguous is within the range of "possible, acceptable outcomes, which are defensible in respect of the facts and law" for several reasons. However, before explaining our reasons for saying the arbitrator's conclusion was within the range of possible acceptable outcomes, we note that the Divisional Court relied on a number of inaccurate facts in reaching the contrary conclusion.

[16] For example, the Divisional Court indicated [at para. 21] that the MOA "clearly stated an intention to incorporate all the terms of previous collective agreements", whereas the actual wording referred only to the singular "previous Collective Agreement which expires on August 31, 2001" (underlining in original; emphasis added in bold/italics/ underlining).

[17] In addition, the Divisional Court stated [at para. 21] that the "letters of agreement regarding guaranteed hours in the prior collective agreement clearly and explicitly indicated that holiday pay was to be included in the 14% in lieu of benefits payment" (emphasis in original). In fact, the letter of agreement regarding guaranteed hours in the prior collective agreement did not refer to the 14 per cent in lieu of benefits payment. Rather, as set out above, it provided that the employees would forego holiday pay for statutory holidays in exchange for guaranteed hours. As noted in footnote 2, there had been a 1992 letter of agreement containing the terms referred to by the Divisional Court. However, that letter had expired in 1997 and did not form part of the agreement between the parties that immediately preceded the MOA.

[18] Returning to an analysis of the arbitrator's reasons, there are several reasons for finding that his conclusion that the collective agreement was ambiguous was reasonable.

[19] First, the language of Appendix 6 is internally inconsistent. There are at least two reasonable interpretations of Appendix 6. On one reading, urged by the Employer, Appendix 6 has the effect of disentitling employees to holiday pay for [page310] statutory holidays. The other interpretation, urged by the Union, entitles the employees to holiday pay for statutory holidays.

[20] The difficulty in interpretation arises from the inconsistency in Appendix 6 between its reference to the letters of agreement and its reference to new language for Article 19:02 to meet the new Employment Standards Act, 2000, S.O. 2000, c. 41. The 1997 letter of agreement provides that part-time employees are not entitled to holiday pay for statutory holidays. On the other hand, the inclusion of language in Article 19:02 to meet the Employment Standards Act, 2000 would entitle employees to pay for statutory holidays. To add to the difficulty, there is reference to 3 per cent of total payroll, wording that the Divisional Court did not address. The purpose of this reference is not clear, particularly in light of the inconsistency referred to above and the location of the reference in the paragraph.

[21] Moreover, we are of the view that it was open to the arbitrator in concluding that the language was ambiguous to consider the evidence that the reference to 3 per cent in Appendix 6 was to the Employer's cost of providing holiday pay for statutory holidays to part-time employees. The respondent does not dispute that it is open to an arbitrator considering a submission that a provision in a collective agreement is ambiguous to have regard to extrinsic evidence in determining the issue of ambiguity: see Noranda Metal Industries Ltd., Fergus Division v. International Brotherhood of Electrical Workers, Local 2345 (1983), 1983 CanLII 1690 (ON CA), 44 O.R. (2d) 529, [1983] O.J. No. 3280 (C.A.), at pp. 535-36 O.R.

[22] Having determined that Appendix 6 was ambiguous, it was also open to the arbitrator to have regard to extrinsic evidence to assist in clarifying the ambiguity. After executing the MOA, a "blue book", entitled "Collective Agreement" between the parties "September 1, 2001 -- August 31, 2004", purporting to set out the terms of the collective agreement, was prepared and distributed. The blue book was not signed by the parties and it was for that reason that the arbitrator found that the MOA constituted the collective agreement.

[23] That said, in trying to resolve the ambiguity in Appendix 6, the arbitrator had regard to two provisions in the blue book. First, he noted that Article 17:01, which dealt with guaranteed hours, did not include the phrase "in exchange" for statutory holidays that had been included in the 1997 letter of agreement. Further, the arbitrator noted that Article 19:02 in the blue book created an entitlement to holiday pay for statutory holidays regardless of whether the employee works on the [page311] statutory holiday. The arbitrator concluded that the inclusion of these provisions in the blue book favoured the interpretation of the MOA urged by the Union.

[24] In addition, immediately after the MOA came into effect, the Employer began paying part-time employees for statutory holidays not worked, which was consistent with Article 19:02 of the blue book. Moreover, the Employer continued these payments without objecting for over three years. The Employer's practice supports the Union's interpretation of Appendix 6.

[25] In February 2005, during negotiations for the next collective agreement, the Employer's manager of human resources, who had not been involved in the MOA negotiations, took the position with the Union that part-time employees were not entitled to holiday pay for statutory holidays under the MOA. However, the Employer called no evidence to support this position or explain why payments had been made for the previous three years.

[26] The arbitrator had regard to both the above provisions in the blue book and the Employer's practice of paying holiday pay for statutory holidays. The arbitrator concluded that, taken as a whole, these facts strongly suggest that the Employer understood that the MOA constituted an entitlement to holiday pay for statutory holidays. He also noted the absence of evidence suggesting that the Employer's representatives involved in the negotiation and execution of the MOA understood it to mean something different or that someone mistakenly had authorized the payments made. He concluded that, taken as a whole, the evidence of past practice resolved the ambiguity in the Union's favour.

[27] The respondent argues that the arbitrator erred in considering the evidence referred to above in resolving the ambiguity because that evidence failed to meet the test set out in John Bertram & Sons Co. v. International Association of Machinists, Local 1740 (Greenwood Grievance), 1967 CanLII 1039 (ON LA), [1967] O.L.A.A. No. 2, 18 L.A.C. 362. We do not accept this argument. Even assuming that the Bertram test applies to the circumstances of this case, in our view, it is implicit in the arbitrator's reasoning that he had regard to the appropriate factors. In any event, we are satisfied that the evidence he relied upon could reasonably come within the factors suggested in that case.

[28] In summary, we are of the view that the arbitrator's decision was not unreasonable and that the Divisional Court erred in interfering with that decision. In light of that conclusion, it is unnecessary to deal with any other submissions raised by the appellant. [page312]

[29] The appeal is therefore allowed, the decision of the Divisional Court is set aside and the award of the arbitrator is reinstated.

[30] The parties agree that costs of the application for judicial review, the leave motion and the appeal should be fixed at a total of $25,000, inclusive of disbursements and the Goods and Services Tax. Costs in that amount are awarded to the appellant.

Appeal allowed.

Notes

Note 1: The issue argued on appeal was whether part-time employees were to be paid for statutory holidays the did not work. As a result, throughout these reasons, when we refer to employees and to holiday or statutory pay, the references are to part-time employees being paid for statutory holidays not worked.

Note 2: There was a 1992 letter of agreement that temporarily suspended part-time employees' right to holiday pay for statutory holidays for a period of time during which it would be "deemed to be included in the 14% in lieu of benefits". That letter of agreement expired in 1997. It did not make reference to guaranteed hours.