United Food and Commercial Workers Union of Canada, Local 175 v. Silverstein’s Bakery Ltd., 2020 ONSC 5649
CITATION: United Food and Commercial Workers Union of Canada, Local 175 v. Silverstein’s Bakery Ltd., 2020 ONSC 5649
DIVISIONAL COURT FILE NO.: 594/18
DATE: 20200922
ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT
Swinton, Pattillo and Kristjanson JJ.
BETWEEN:
United Food and Commercial Workers Union of Canada, Local 175 Applicant
– and –
Silverstein’s Bakery Ltd. Respondent
Douglas Wray and Jessie Kugler, for the Applicant
Michael Horvat and Daria Peregoudova, for the Respondent
HEARD (by videoconference): August 19, 2020
Swinton J.
Overview
[1] This application for judicial review arises out of the bankruptcy of the respondent Silverstein’s Bakery Ltd. (“Bakery”). The United Food and Commercial Workers Union of Canada, Local 175 (the “Union”), which represented a group of Bakery’s employees, filed a grievance to obtain termination and severance pay following the bankruptcy. It now seeks judicial review of an arbitration award dated May 2, 2018 in which Arbitrator Ian Anderson determined that he had no jurisdiction to adjudicate a grievance concerning termination pay and severance pay as against Silverstein’s Holdings Incorporated (“Holdings”) and the directors of Bakery and Holdings.
[2] The Union argues that the arbitrator erred in finding that he had no jurisdiction. For the reasons that follow, I find that the arbitrator’s decision was reasonable, and I would dismiss the application for judicial review.
Background
[3] On July 28, 2016, Bakery permanently laid off all its employees without paying termination or severance pay. The following day, Bakery was placed into a private receivership by Holdings, a separate corporation that owned the building in which Bakery carried out its operations. Bakery closed as a result of its related bankruptcy.
[4] The Union filed a grievance claiming termination and severance pay under the Employment Standards Act, 2000, S.O. 2000, c. 41 (“ESA”), as well as under provisions of the collective agreement that provided for severance pay beyond that in the ESA in the event of an organizational downsizing, closure, partial closure or reduction of employees. The claim was made against Bakery, the employer, and others who were not parties to the collective agreement, notably Holdings and the directors of both Bakery and Holdings.
[5] Subsection 100(1) of the ESA permits an arbitrator to make an order against an employer who has contravened the ESA. Section 4 of the ESA provides that an employer and another person may be treated as one employer for the purposes of the Act in certain circumstances. However, an arbitrator does not have the authority to decide if an employer and another person are to be treated as one employer under s. 4. The Ontario Labour Relations Board (“OLRB”) is given the jurisdiction to make such a determination pursuant to s. 101(3), (5) and (6) of the ESA.
[6] On October 14, 2016, the arbitrator appointed to hear the Union’s grievance issued an interlocutory award referring to the OLRB the issue of whether Holdings was a related employer within the meaning of s. 4 of the ESA. The OLRB issued a decision dated March 9, 2018 finding that Holdings was an integral part of the business carried on by Bakery, and that the carrying on of related activities or businesses by Bakery and Holdings had the effect of defeating the intent and purpose of the ESA. Accordingly, Bakery and Holdings were to be treated as one employer for purposes of the ESA.
[7] The Union had also brought an application before the OLRB pursuant to s. 69 and/or s. 1(4) of the Labour Relations Act, 1995, S.O. 1995, c.1, Sch. A (“LRA”), seeking a determination that there had been a sale of the business from Bakery to Holdings, or that Holdings and Bakery carry on related or associated businesses and should be treated as one employer for the purposes of the OLRA. The Union has not pursued that application, and Union counsel candidly stated in oral argument of the present application that the Union was unlikely to be successful before the OLRB.
The Arbitration Award
[8] After the OLRB decision under the ESA, the Union sought a remedial order from the arbitrator. At para. 14 of the arbitration award, the arbitrator set out the Union’s position. Notably, for purposes of the present application for judicial review, the Union asked the arbitrator to make orders against Holdings only pursuant to the ESA. It did not seek to join Holdings to the collective agreement. In other words, it did not seek an order that Holdings pay enhanced severance pay under the collective agreement.
[9] The Union relied on s. 48(12)(j) of the LRA, which permits an arbitrator to interpret and apply employment-related statutes, arguing that the arbitrator could grant relief against both Bakery and Holdings. That provision states:
An arbitrator or the chair of an arbitration board, as the case may be, has power,
(j) to interpret and apply human rights and other employment-related statutes, despite any conflict between those statutes and the terms of the collective agreement.
The Union argued that this provision permitted the arbitrator to apply both the ESA and s. 131 of the Ontario Business Corporations Act, R.S.O. 1990, c. B.16 (“OBCA”), which deals with directors’ liability for corporate debts.
[10] The arbitrator rejected the Union’s argument about his jurisdiction. With respect to Holdings’ liability under the ESA, he relied on ss. 99-101 of the ESA. In his view, s. 101(6) of the ESA confers the exclusive jurisdiction on the OLRB to make a remedial order against an “other person” that it has found to be a related employer within s. 4.
[11] The arbitrator noted, as well, that nothing in the ESA makes the “other person” a party to the employer’s collective agreement. Section 48(1) of the OLRA requires the parties to a collective agreement to resolve their disputes through grievance arbitration. It states:
Every collective agreement shall provide for the final and binding settlement by arbitration, without stoppage of work, of all differences between the parties arising from the interpretation, application, administration or alleged violation of the agreement, including any question as to whether a matter is arbitrable. (emphasis added)
In the arbitrator’s view, s. 48(12)(j) of the OLRA did not provide him with authority to interpret and apply legislation to persons who were not parties to the dispute before him. Accordingly, he concluded that he had no jurisdiction to make orders respecting termination and severance pay under the ESA against Bakery and Holdings.
[12] With respect to the claim for relief against the directors of Bakery and Holdings, he again concluded that he lacked jurisdiction to make an order for severance pay. Section 81(3) of the ESA expressly excludes termination and severance pay from directors’ liability for unpaid wages.
[13] The Union relied on s. 131 of the OBCA, which makes directors liable for debts for services performed for the corporation in certain circumstances. The arbitrator accepted that s. 131 of the OBCA was an employment-related statute within the meaning of s. 48(12)(j) of the OLRA, but he held that he did not have authority to apply it to the dispute before him. The parties to the dispute before him were the parties to the collective agreement – that is, the employer, Bakery, and the Union. As the directors were not parties to the collective agreement, he had no authority to make orders against them pursuant to s. 131 of the OBCA.
Subsequent Events
[14] After the arbitrator’s award, the Union returned to the OLRB seeking a remedial order against Bakery and Holdings pursuant to the ESA. In August 2018, the OLRB ordered the payment of $991,266.27 in termination and severance pay to Bakery employees, and that order has been satisfied.
[15] The Union did not proceed with the successor employer application under the OLRA. Instead, it has pursued this application for judicial review of the arbitration award.
[16] The Union has also filed a Statement of Claim in which it makes a claim, among other things, against the directors of Bakery and Holdings for the payment of amounts owing in respect of enhanced severance payments under the collective agreement. That proceeding has been held in abeyance, on consent of the parties, pending the determination of this application for judicial review.
The Issues
[17] The Union frames the issues as follows:
What is the appropriate standard of review?
Did the arbitrator err in holding that he had no jurisdiction to order payment of termination and severance pay under the ESA by Bakery or Holdings?
Did the arbitrator err in holding that he lacked jurisdiction to make orders under the ESA or the OBCA against the directors of either Bakery or Holdings?
The Standard of Review
[18] The Union submits that the standard of review in this application is correctness. While it acknowledges that there is a presumption that the standard of review is reasonableness in applications for judicial review, it argues that there are two reasons for finding that correctness applies here. First, the presumption of reasonableness has been rebutted, because the question raised in the application concerns the jurisdictional boundaries between the OLRB and an arbitrator. Alternatively, the issues before the arbitrator raise a general question of law of central importance to the legal system as a whole (Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 at paras. 58-64).
[19] I disagree. In Vavilov, the Supreme Court stated that correctness would apply rarely in respect of questions regarding the jurisdictional boundaries between two or more administrative bodies. That standard would apply “where an administrative body has interpreted the scope of its authority in a manner that is incompatible with the jurisdiction of another” (at para. 64). The Supreme Court was concerned about “conflicting orders and proceedings where they result in the true operational conflict between two administrative bodies, pulling a party in two different and incompatible directions” (at para. 64). Here, the arbitrator has not interpreted his jurisdiction in a manner that is incompatible with the jurisdiction of the OLRB or that of the courts in applying s. 131 of the OBCA. Rather, he ruled that he did not have the authority to make the orders sought.
[20] Nor can the questions raised in the application be characterized as questions of law of central importance to the legal system as a whole. The arbitrator was determining an issue of arbitrability – that is the scope of his authority to resolve the immediate dispute before him. It required him to consider the collective agreement and to interpret and apply employment-related statutes in light of the facts before him. Even issues of “jurisdiction” are subject to reasonableness review (Vavilov at paras. 65 and 68), and that it is the appropriate standard of review for the issues in this application.
Did the arbitrator err in holding that he had no jurisdiction to order payment of termination and severance pay under the [ESA](https://www.canlii.org/en/on/laws/stat/so-2000-c-41/latest/so-2000-c-41.html) against Bakery or Holdings?
[21] This issue concerns the arbitrator’s ruling that he had no jurisdiction to make an order of termination and severance pay under the ESA. Given that the OLRB has now made an order against Bakery and Holdings pursuant to the ESA for the payment of termination and severance pay, and given that the order has been satisfied, the Court raised the issue of mootness with respect to this issue during the oral argument of the application.
[22] The Union conceded that there is no live dispute with respect to the ESA entitlements as against Bakery and Holdings. However, it argued that there is still a live issue with respect to Holdings’ liability for enhanced severance benefits under the collective agreement.
[23] I see two problems with the Union’s position. First, it appears that the Union has never asked the arbitrator to make an order against Holdings based on the provisions of the collective agreement. In the arbitrator’s summary of the Union’s position before him, he stated that the Union sought ESA benefits against Holdings. There is no mention of the enhanced severance benefits under the collective agreement.
[24] Second, it is evident from the arbitrator’s award that this argument would have failed, given his reasoning with respect to the relief sought against the directors. The arbitrator has jurisdiction, pursuant to s. 48(1) of the OLRA, to resolve differences “between the parties” to a collective agreement arising from the interpretation, application, administration or alleged violation of the agreement. The arbitrator held that he could not make an award against the directors as they were not parties to the collective agreement. As the respondent and the arbitrator correctly pointed out, Holdings is not a party to the collective agreement.
[25] The declaration pursuant to s. 4 of the ESA did not make Holdings a party to the collective agreement. In order to bind Holdings to the collective agreement, the Union had to pursue its application before the OLRB for a related employer declaration, because the OLRB has the exclusive authority, pursuant to s. 1(4) of the OLRA, to determine that Holdings and Bakery were a related employer (see, for example, United Steelworkers Local v. Resolute Forest Products Thunder Bay Woodlands (Nyman, October 27, 2014) at paras. 33 and 35). The Union in the present case chose not to proceed before the OLRB.
[26] I see no basis for judicial intervention with respect to the claims against Holdings. First, the ESA based claim against Holdings is moot. Second, there has been no attempt to pursue a claim against Holdings pursuant to the collective agreement, and, in any event, such a claim would be bound to fail, given that Holdings is not a party to the collective agreement, and there has been no attempt to obtain a related employer ruling from the OLRB.
Did the arbitrator err in holding that he lacked jurisdiction to make orders against the directors under the [ESA](https://www.canlii.org/en/on/laws/stat/so-2000-c-41/latest/so-2000-c-41.html) or the [OBCA](https://www.canlii.org/en/on/laws/stat/rso-1990-c-b16/latest/rso-1990-c-b16.html)?
[27] The Union does not dispute that the arbitrator had no authority to make an order under the ESA for the payment of termination and severance pay, given that s. 81(3) of the ESA expressly states that directors are not liable for termination or severance pay pursuant to the Act.
[28] However, the Union argues that the arbitrator erred in not considering the merits of its claim against the directors pursuant to s. 131 of the OBCA, given that s. 131 is an employment-related statute within the meaning of s. 48(12)(j) of the OLRA.
[29] Section 131 of the OBCA provides:
(1) The directors of a corporation are jointly and severally liable to the employees of the corporation for all debts not exceeding six months’ wages that become payable while they are directors for services performed for the corporation and for the vacation pay accrued while they are directors for not more than twelve months under the Employment Standards Act, and the regulations thereunder, or under any collective agreement made by the corporation.
(2) A director is liable under subsection (1) only if,
(a) the corporation is sued in the action against the director and execution against the corporation is returned unsatisfied in whole or in part; or
(b) before or after the action is commenced, the corporation goes into liquidation, is ordered to be wound up or makes an authorized assignment under the Bankruptcy and Insolvency Act (Canada), or a receiving order under that Act is made against it, and, in any such case, the claim for the debt has been proved.
(3) Where execution referred to in clause (2) (b) has issued, the amount recoverable from a director is the amount remaining unsatisfied after execution.
(4) Where a director pays a debt under subsection (1) that is proved in liquidation and dissolution or bankruptcy proceedings, the director is entitled to any preference that the employee would have been entitled to, and where a judgment has been obtained the director is entitled to an assignment of the judgment.
(5) A director who has satisfied a claim under this section is entitled to contribution from the other directors who were liable for the claim.
[30] I start with the observation that only one case was cited to this Court where an arbitrator held that he had the authority to make an order holding directors liable for termination and severance pay. That case, Northland Superior Supply Company Ltd. and Sheet Metal Workers International Association Local 397, 2005 78286 (Harris), was made in the absence of representation from the employer, the trustee in bankruptcy or the directors.
[31] The arbitrator in this case did not find Northland persuasive, and I share his opinion, given that the arbitrator in that case did not consider his authority to make an order against individuals who were not parties to the collective agreement. In contrast, the present arbitration award is consistent with other arbitration awards on directors’ liability, such as Drywall Acoustic Lathing and Insulation Local 675, United Brotherhood of Carpenters and Joiners of America v. Alcor Investment Group Inc., 2002 40933 (ON LRB).
[32] The Union argues that the arbitrator’s decision is inconsistent with the Supreme Court of Canada’s decision in Weber v. Ontario Hydro, 1995 108 (SCC), [1995] 2 S.C.R. 929, particularly as it has been applied in Ontario in United Food and Commercial Workers Canada, Local 175, Region 6 v. Quality Meat Packers Holdings Limited, 2018 ONCA 671 (Caetano).
[33] In Weber, the Supreme Court of Canada dealt with the issue of whether the courts or a labour arbitrator had the authority to deal with a particular dispute. An employee had brought a civil action against his employer based on tort and breach of his Charter right to privacy because the employer had engaged in surveillance of him while he was on sick leave. The Court held that the dispute must be resolved by arbitration, given the wording of the predecessor to s. 48(1) of the OLRA. The majority held that when the “essential character” of the dispute arises from the interpretation, application, administration or violation of the collective agreement, the dispute is within the exclusive jurisdiction of an arbitrator (see paras. 52 and 54).
[34] Weber has been considered in many cases, including Brown v. University of Windsor, 2016 ONCA 431. In Brown, the Court of Appeal set out the test to be applied when determining whether an arbitrator, rather than the courts, has the jurisdiction to apply a statute to resolve a dispute in a unionized setting:
The question is “whether there is a real contextual connection between the statute and the collective agreement such that a violation of the statute gives rise, in the context, to a violation of the provisions of the collective agreement”. In applying this test, one must remember Weber’s caution that the nature of the dispute is based upon the factual context in which it arises regardless of how it may be legally characterized. (at para. 45)
[35] While there have been many other cases dealing with the application of Weber, the Union relies in particular on Caetano. In that case, employees brought a civil action for wrongful dismissal against their employer, related companies and directors after the bankruptcy of their employer. They sought damages, including payment for lack of notice of termination and for the failure to pay severance. The Court of Appeal held that the substance of the dispute was a claim for wrongful dismissal and severance, and, therefore, the dispute should be resolved through arbitration (at paras. 13-14).
[36] The Union argues, in reliance on Caetano, that the substance of the present dispute, including the claims against the directors, arises under the collective agreement, and the arbitrator erred in holding that he had no jurisdiction to deal with whether the directors were liable pursuant to the OBCA.
[37] The problem with this argument is that the Court of Appeal did not directly address the liability of directors in Caetano. It characterized the dispute as one concerning wrongful dismissal and unpaid severance, matters that come within the exclusive jurisdiction of an arbitrator. Similarly, the dispute in the present case is a claim for unpaid severance that is within the jurisdiction of an arbitrator. However, neither Weber nor Caetano extend the authority of an arbitrator to make a remedial order against a non-party to the collective agreement.
[38] The arbitrator’s decision does not conflict with the Weber line of cases. He concluded that he had no jurisdiction to apply s. 131 of the OBCA to individuals who were not parties to the dispute before him. That was a reasonable conclusion, given that his task was to resolve disputes between parties to the collective agreement – the Union and Bakery − and given that s. 131 provides a remedy to hold directors liable through a civil process in the courts. In particular, s. 131(2) sets out conditions and a process that must be followed in order to hold directors liable for debts for services provided to a corporation. Notably, that process requires a civil action in the courts.
[39] The arbitrator’s reasoning was clear and logical and consistent with the language of the applicable statutes. As the Union has not demonstrated that his decision was unreasonable, I see no basis for judicial intervention.
Conclusion
[40] Accordingly, the application for judicial review is dismissed.
[41] Bakery sought costs of $15,000, while the Union proposed a sum of $5,000. In my view, the costs sought by Bakery are outside the range usually awarded in applications for judicial review of this complexity. I would award costs to Bakery in the amount of $7,500.00 all inclusive.
Swinton J.
I agree _______________________________
Pattillo J.
I agree _______________________________
Kristjanson J.
Date of Release: September 22, 2020
CITATION: United Food and Commercial Workers Union of Canada, Local 175 v. Silverstein’s Bakery Ltd., 2020 ONSC 5649
DIVISIONAL COURT FILE NO.: 594/18
DATE: 20200922
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Swinton, Pattillo and Kristjanson JJ.
BETWEEN:
United Food and Commercial Workers Union of Canada, Local 175 Applicant
– and –
Silverstein’s Bakery Ltd. Respondent
REASONS FOR JUDGMENT
Swinton J.
Date of Release: September 22, 2020