DIVISIONAL COURT FILE NO.: 605/20 DATE: 20210922
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
D. Corbett, Kristjanson and Favreau JJ.
B E T W E E N:
MORE MASONRY INC.
Michael Mazzucca and Sam Hall counsel for the Applicant
Applicant
- and -
Bricklayers, Masons Independent Union of Canada Local 1, Labourers’ International Union of North America, Local 183, and Masonry Council of Unions Toronto and Vicinity
Respondents
L.A. Richmond and Char Wiseman, counsel for the Respondents
HEARD at Toronto (by videoconference): March 24, 2021
REASONS FOR DECISION
Kristjanson J.
[1] More Masonry Inc. seeks judicial review of a damages order made by Arbitrator Michael Horan on November 15, 2020 in two grievance arbitration proceedings between it and the Respondents Bricklayers, Masons Independent Union of Canada Local 1, Labourers’ International Union of North America, Local 183, and Masonry Council of Unions Toronto and Vicinity (collectively, the “Union”). The multi-employer collective agreement which applies to construction masonry work involves expedited arbitration by a specialized roster of arbitrators under the Bricklaying Enforcement System, a grievance adjudication and enforcement system established by the Masonry collective agreement. After finding the Applicant had breached provisions of the collective agreement relating to documentary disclosure and production, the Arbitrator ordered More Masonry to pay liquidated damages of $185,000.00 in accordance with the formula set out in the collective agreement.
[2] More Masonry seeks to quash the decision as an unreasonable decision which was the product of a procedurally unfair process. For reasons set out below the application for judicial review is dismissed, except that the parties agree that there was a mathematical calculation error in the damages order, and this Court remits the calculation of the amount to the Arbitrator.
Background Facts
The Parties and the Collective Agreement
[3] More Masonry is a masonry company incorporated in 2017. The Bricklayers', Masons Independent of Canada, Local 1 and Labourers' International Union of North America, Local 183 are unions that represent employees including construction employees who perform various forms of masonry work. The Masonry Council of Unions Toronto and Vicinity is a council of unions.
[4] The Masonry collective agreement is a multi-employer collective agreement between the Union and the Masonry Contractors' Association of Toronto ("MCAT"), which is an employer association that represents unionized employers in the masonry business. More Masonry became bound to the Masonry collective agreement as a result of a voluntary recognition agreement entered into with the Union on October 18, 2017.
[5] The context of the grievance proceedings is the Bricklaying Enforcement System, which is a grievance adjudication and enforcement mechanism established in a schedule to the Masonry collective agreement. Expedited arbitration is a central component of the Bricklaying Enforcement System. As the Ontario Labour Relations Board (“OLRB”) set out in Kennedy Masonry Company Limited v. Labourers' International Union of North America, Local 183, 1998 18297 (ON LRB) at paras. 30 and 34:
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….
…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.
[6] The Bricklaying Enforcement System provides for an expedited arbitration process. A specialized arbitrator will hear grievances within 10 days of referral. Grievances are referred to a panel of labour arbitrators with expertise not only in construction labour relations, but with the specific collective agreement in issue. Documents must be exchanged prior to the first day of hearing, and damages are payable for failure to produce documents in a timely manner.
[7] The Union represents employees in construction who perform masonry work. The grievances here relate to work that the Union alleges was subcontracted out by the Applicant in violation of the Masonry collective agreement. The grievances are dated July 16, 2020 and September 11, 2020.
The Initial Production Request – September 2-23, 2020
[8] The Union made its initial production request on September 2, 2020 seeking documents from the one-year period prior to the filing of the July 16, 2020 grievance. The Applicant argued that Articles 4.05(b) and (c) of the collective agreement only entitled the Union to documents from a six-month period prior to the date of the grievance.
[9] On September 15, 2020, before 15 days had elapsed after the September 2, 2020 request, counsel for the More Masonry wrote to the Union challenging the initial production request, but offering to make documents going back six months available for inspection by the Union, at counsel's officed, rather than the Employer’s office as required by the collective agreement. The documents were not provided to the Union and the Union did not attend at counsel's office to inspect them. The Union sought to have the Arbitrator address the production dispute.
The Production Order – October 3, 2020
[10] The Arbitrator heard argument on the production dispute on October 3, 2020 and made an order (the Production Order”.) The Arbitrator found that the Applicant had breached Article 4.05 by failing to disclose documents within the 15-day period after the Union’s September 2, 2020 request. The Arbitrator held that Article 4.05 of the collective agreement requires that the employer produce the documents within the 15-day period, regardless of whether they are first inspected. Further, the Arbitrator held that the Employer is not entitled under Article 4.05 to substitute review at its office for review at its counsel’s office, unless the Union agrees.
[11] The Arbitrator found that the Union was not entitled to production for a one-year period as requested, and that it had to provide particulars regarding the scope of the grievance. The Arbitrator also granted the Applicant’s request that conditions be attached to production to protect confidentiality. The Applicant was ordered to produce some of the documents forthwith. The Arbitrator reserved his decision on any penalties the Applicant may have incurred under Article 4.05. No judicial review was sought from the Production Order. The Applicant uploaded the documents to a Dropbox in accordance with the Production Order on October 7, 2020.
The Damages Order – November 15, 2020
[12] The Arbitrator issued his reserve decision on penalties on November 15, 2020 (the “Damages Order”). The Arbitrator relied on his findings in the Production Order that the Union made its request for production on September 2, 2020, and that the Applicant had not complied with the production request within the 15-day period. The Arbitrator cited Article 4.05(c) and emphasized that he had no authority under the collective agreement to vary the amount of the penalty.
[13] The Arbitrator ruled that while the Applicant had requested a full hearing on the quantum of damages, he had sufficient submissions on the Article 4.05 issue to proceed. The Arbitrator held that such a hearing would be counter to the purpose of the Bricklaying Enforcement System scheme to promote efficiency. The Arbitrator ordered that the Applicant pay the Union $185,000 in liquidated damages pursuant to Article 4.05(c).
Jurisdiction
[14] The Divisional Court has jurisdiction to hear this application under section 2(1) of the Judicial Review Procedure Act, R.S.O. 1990, c. J.1 (“JRPA”).
Standard of Review
[15] The parties agree that reasonableness is the standard of review on substantive issues: Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 at para. 37. There is no standard of review for questions of procedural fairness; rather, the court determines whether the administrative decision-maker afforded the appropriate level of procedural fairness.
[16] When conducting a reasonableness review, the court must begin its inquiry by examining the reasons of the administrative decision maker with “respectful attention”, seeking to understand the reasoning process followed by the decision maker (Vavilov, at para. 84). The reasons should be read holistically and contextually (Vavilov, at para. 97). The reviewing court must ask “whether the decision bears the hallmarks of reasonableness—justification, transparency and intelligibility—and whether it is justified in relation to the relevant factual and legal constraints that bear on the decision” (Vavilov, at para. 99). A reasonable decision is “one that is based on an internally coherent and rational chain of analysis and that is justified in relation to the facts and law that constrain the decision maker” (Vavilov, at para. 85). The reviewing court must be satisfied that the decision does not have a “fatal flaw” in its “overarching logic” and that “there is [a] line of analysis within given reasons that could reasonably lead the tribunal from the evidence before it to the conclusion at which it arrived” (Vavilov, at para. 102).
Issues
Was the Damages Order decision unreasonable?
Did the Arbitrator breach procedural fairness?
Did the Arbitrator unreasonably fetter his discretion?
Was the Arbitrator’s decision on the quantum of damages unreasonable, including by virtue of a mathematical calculation error?
The Damages Order is Not Unreasonable
[17] The Applicant argues that the Damages Order is unreasonable for several reasons. The Applicant argues that damages should not flow from the date of the Union’s request on September 2 (as stated in the collective agreement) but from the date the question was finally determined by the Production Order on October 3, 2020. The Applicant points out that in the Production Order the Arbitrator narrowed the scope of production (to the six months required under the collective agreement and not the one year of production requested by the Union). The Applicant also notes that it offered the documents for inspection within the 15-day period, although not at the place required by the collective agreement. The Applicant argues that the Arbitrator misinterpreted Article 4.05 of the collective agreement in finding that the offer to inspect at offices of More Masonry’s counsel did not comply with collective agreement obligations.
[18] These arguments are all collateral attacks on the Production Order, which is not under review. The Arbitrator relied on his findings in the Production Order – that the obligation to produce arose on September 2, and that the Applicant failed to comply with the location of inspection, and obligation to produce – and then interpreted and applied the collective agreement to the facts established in the Production Order. The Production Order is not under review, and the facts as found in the Production Order stand.
[19] The appellant argued that the unique challenges posed by the COVID pandemic should have been taken into account and should have given rise to some remedial discretion. I do not accept this argument. The COVID issues pertain to the offer to inspect. The penalty applies to the failure to produce. COVID challenges apply to both sides, and just as it may have been reasonable for the appellant to have not wanted an inspection at the company's head office (a private home), it may also have been reasonable for the union to have wanted to avoid attending at a lawyer's office mid-pandemic. None of this changes the obligation to produce on time and none of this provides an excuse for failing to do so.
[20] The Applicant now argues that the collective agreement "liquidated damages" clause is unlawful and unenforceable since it provides a penalty with no genuine pre-estimate of damages. It does not appear that the alleged illegality was raised before the Arbitrator. In any event, when considering negotiated collective agreements, the common law relating to penalty clauses does not apply. The Masonry collective agreement sets an industry-wide terms and conditions and a common dispute resolution framework. The institutional parties, on both the employer and union sides, have an interest in their members abiding by its terms, in order to protect the level playing field that the collective agreement seeks to achieve. Penalty clauses exist to deter this kind of non- compliance on an industry-wide basis. I agree with the OLRB in Kennedy Masonry Company Limited v. Labourers' International Union of North America, Local 183, 1998 18297 (ON LRB) at para. 62:
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 bona fide 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.
[21] The Arbitrator relied on Article 2:08 of the Masonry collective agreement, which provides that an arbitrator shall not have any power to make a decision inconsistent with Bricklaying Enforcement System or the collective agreement. The Masonry collective agreement provides for the calculation of the amount of monies to be paid and that they be paid "forthwith". The Arbitrator’s decision to apply the collective agreement terms on penalties for failure to disclose and produce was reasonable, bearing the hallmarks of justification, transparency and intelligibility, and consistency with the specialized labour relations scheme.
[22] The Applicant argues that the Arbitrator’s decision is unreasonable in that it failed to apply the common law principle of good faith in making the Damages Order. It argues that the Union pursued damages in bad faith, and the Damages Order allowed the Union to unreasonably refuse to review production at counsel’s office, and thereafter use such refusal to claim damages for failure to produce in a timely manner. It is not clear that this argument was raised before the Arbitrator. In any event, pursuing a penalty that is established in a collective agreement does not constitute bad faith. I agree with the Union’s submission that: “The prescribed quantum of damages is not designed to constitute a reasonable pre-estimate of damages; it is designed to ensure a level playing field in a unique and complex collective bargaining complex by imposing a cost on non-compliance.”
Procedural Fairness
[23] The Applicant, relying on Baker v. Canada (Minister of Citizenship and Immigration), 1999 699 (SCC), [1999] 2 S.C.R. 817 (“Baker”), argues that because the Damages Order had a significant and adverse effect on the Applicant’s rights, privileges or interests, the Arbitrator infringed the Applicant’s right to procedural fairness by not allowing it to challenge the propriety and quantum of a damages award. The Applicant argues that the Arbitrator had reserved the issue of damages pending a hearing on the merits of the grievances, and that it had requested a full hearing on the issue of damages. The Applicant further argues that there was nothing expeditious about making the Damages Order since the grievances have not yet been adjudicated and the Union is not likely to receive a fraction of the damages award if successful on the merits.
[24] The Arbitrator did not reserve his decision to the grievance hearing. He simply reserved the penalty aspect of the September 23 Production Order hearing. The Arbitrator heard argument on damages at the September 23, 2020 hearing, which was followed by written submissions on damages prior to the Damages Order. As the Arbitrator found, all of the relevant facts with respect to the production request and ultimate compliance were or or could have been made, known. The Bricklayer Enforcement System is designed to be expeditious; compelling relevant documentary production is an essential first step in any proceeding. The Masonry collective agreement is specifically designed to encourage expeditious production of relevant documents and expeditious resolution of preliminary disputes. The Applicant’s submission that production penalty questions should be dealt with at the time of the grievances merits hearing misconstrues the purpose of Article 4.05. This provision aims to promote prompt production. Regardless of whether the Union was successful at the conclusion of the hearing, early and efficient production is a requirement under the collective agreement. As the Arbitrator found with respect to the context of the damages decision, “[t]o convene another hearing on this subject would be inconsistent with the announced purpose of "expedition" contained in the [Bricklayer Enforcement System]”. The Applicants received a hearing on the issue of damages. There was no breach of procedural fairness as the Applicant received appropriate participatory rights.
Calculation of Damages
[25] The Arbitrator ordered More Masonry to pay damages of $185,000 pursuant to Article 4:05(c) of the Masonry collective agreement which provides:
(c) If the Employer fails to produce the documents requested under subparagraph (b) or make them available for inspection by the Union, within the fifteen-day time limit, then the Employer will forthwith pay to the Union Liquidated Damages in the amount of Fifteen Thousand Dollars ($15,000). Where the documents have still not been produced the Employer will pay to the Union Liquidated Damages of Ten Thousand Dollars ($10,000) per day calculated from the sixteenth day from the date of the Grievance and continuing.
[26] Although not raised before the Arbitrator, nor in its written submissions on appeal, in oral argument More Masonry argues that the mathematical calculation of damages was incorrect. Article 4.06 of the collective agreement provides that Saturdays, Sundays and statutory holidays are to be excluded in the calculation of time. The Damages Order did not take this provision into account. The Union agrees that the mathematical calculation error should be fixed and should be remitted to the Arbitrator for that purpose. The proper amount of damages to be calculated taking into account Article 4.06 is remitted to the Arbitrator.
[27] The Applicant also argues that the amount is disproportionate to the actual quantum at issue on the merits and is a marked departure from the normal practice, without citing cases on all fours with this one. The court does not ask what decision it would have made in place of the decision maker, but only whether the rationale for the decision and its outcome are reasonable. The institutional parties to the Masonry collective agreement have negotiated detailed provisions to encourage compliance with the expedited arbitration system, including financial penalties to discourage non-compliance. There is nothing in the Masonry collective agreement that requires or contemplates a weighing of the quantum at issue in a grievance with the penalties for failure to produce documents in a timely manner. The Damages Order is a mechanism to enforce the obligation to make timely documentary production, which is essential to the expeditious adjudication of grievances. A reasonableness review must account for the application of arbitral expertise in this expedited, highly specialized context. The Arbitrator reasonably applied the negotiated collective agreement terms, and the decision is reasonable.
Did the Arbitrator improperly fetter his discretion?
[28] The Applicant argues that because the Arbitrator stated that he was unable to make any adjustments to the calculation of damages set out in Article 4.05(c), the order was unreasonable and an instance of fettered discretion. The Applicant argues that the Arbitrator failed to exercise his authority under s. 48(12)(i) of the Labour Relations Act, 1995. Section 48(12)(i) of the LRA provides that an arbitrator has the power to make interim orders concerning procedural matters.
[29] The Arbitrator held:
Article 4:05(c) of the Collective Agreement provides that the Employer "will forthwith pay to the Union Liquidated Damages" for failure to produce documents in accordance with a request.
Article 2:08 of the Bricklaying Enforcement System provides that an arbitrator shall not have any power to make a decision inconsistent with the provisions of the Bricklaying Enforcement System and the Collective Agreement. The Collective Agreement provides for the calculation of the amount of monies to be paid and that they be paid "forthwith". I have no authority to vary the amount or the terms of payment.
[30] Article 4.05 and Article 2.08, together, contain mandatory language and do not leave the Arbitrator with any discretion to alter or decline to make the award pursuant to the penalty clause. The Arbitrator thus did not improperly fetter his discretion.
Conclusion
[31] The mathematical calculation of the penalty, considering the Article 4.06 exclusion of Saturdays, Sundays, and statutory holidays, is remitted to the Arbitrator.
[32] The balance of the judicial review application is dismissed with costs to the respondent Union in the agreed amount of $7,500.00, inclusive.
Kristjanson J.
I agree _______________________________
D. Corbett J.
I agree _______________________________
Favreau J.
Date of Release: September 22, 2021
CITATION: More Masonry Inc. v. Bricklayers, Masons Independent Union of Canada Local 1, 2021 ONSC 6157
DIVISIONAL COURT FILE NO.: 605/20 DATE: 20210922
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
D. Corbett, Kristjanson and Favreau JJ.
BETWEEN:
MORE MASONRY INC.
Applicant
-and-
Bricklayers, Masons Independent Union of Canada Local 1, Labourers’ International Union of North America, Local 183, and Masonry Council of Unions Toronto and Vicinity
Respondents
REASONS FOR DECISION
Kristjanson J.
Date of Release: September 22, 2021