Canada (Attorney General) v. Public Service Alliance of Canada, [1993] 1 S.C.R. 941

indexed as: canada (attorney general) v. public service alliance of canada, [1993] 1 S.C.R. 941

The Attorney General of Canada Appellant

v.

Public Service Alliance of Canada Respondent

indexed as: canada (attorney general) v. public service alliance of canada

File No.: 22295.

1992: November 12; 1993: March 25.

Present: Lamer C.J. and L'Heureux‑Dubé, Sopinka, Gonthier, Cory, McLachlin and Iacobucci JJ.

on appeal from the federal court of appeal

Labour relations ‑‑ Public Service ‑‑ Federal government adopting work force adjustment policy ‑‑ Policy requiring departments to terminate contract services to facilitate redeployment of surplus employees ‑‑ Federal government department contracting out work to reduce person‑years ‑‑ Board ruling in favour of union's reference alleging that contracting out was contrary to policy and to collective agreement ‑‑ Whether Board's decision patently unreasonable.

Administrative law ‑‑ Judicial review ‑‑ Jurisdiction -- Public Service Staff Relations Board ‑‑ Standard of review ‑‑ Whether Board had jurisdiction to determine reference submitted by union ‑‑ Whether Board's decision regarding its jurisdiction must be correct, or whether patently unreasonable standard applies.

In April 1985 the federal government approved a Work Force Adjustment Policy, which was subsequently incorporated as part of the master collective agreement between Treasury Board and the respondent PSAC. The Policy was designed to minimize the impact of a lack of work or the discontinuance of government functions on indeterminate employees, and requires departments to review their use of contracted services and to "terminate them where such action would facilitate the redeployment of affected employees, surplus employees or laid‑off persons". In May 1985 the Minister of Finance called for the reduction of 15,000 person‑years from the public service over a five‑year period. In order to reduce person‑years the Department of National Revenue, Customs and Excise, contracted out the work performed by 270 data processors. PSAC filed a reference pursuant to what is now s. 99 of the Public Service Staff Relations Act (PSSRA) alleging that this contracting out was contrary to the Policy and thus to the master collective agreement between the parties. Section 99 allows an employer or bargaining agent to refer a matter to the Public Service Staff Relations Board where the obligation at issue is not one which could be enforced through an employee grievance. The Board found that it had jurisdiction to hear the reference and ruled in PSAC's favour. The Federal Court of Appeal upheld that decision. This appeal is to determine whether the Board had jurisdiction to determine the reference submitted to it, and, if so, whether it made a patently unreasonable decision in finding that the appellant contravened its collective agreement with PSAC in contracting out data‑capture activities.

Held: The appeal should be dismissed.

Per Lamer C.J. and Sopinka, Cory and Iacobucci JJ.: When an administrative tribunal is acting within its jurisdiction, it will lose jurisdiction only if it acts in a patently unreasonable manner. If the question at issue concerns a legislative provision limiting the tribunal's powers, however, a mere error will cause it to lose jurisdiction. When considering whether a tribunal has made a simple error on the issue of its own jurisdiction, the court should adopt the pragmatic and functional approach articulated in Bibeault.

The decisions of the Board made within its jurisdiction should be treated with deference by the courts. They are protected by a broadly worded privative clause, which was included by Parliament explicitly to ensure that the Board's decisions should be final and conclusive and that courts should not have the power to interfere with them at will. As well, the Board is composed of experts in the field of labour‑management relations. Based on the dictionary definition of the words "patently unreasonable", it is apparent that if the decision the Board reached, acting within its jurisdiction, is not clearly irrational, that is, evidently not in accordance with reason, then it cannot be said that there was a loss of jurisdiction.

The Board's decision that it had jurisdiction to entertain PSAC's reference under s. 99 PSSRA was correct. The functional approach to be used by courts when reviewing the decisions of administrative tribunals relating to their jurisdiction requires that consideration be given to who the intended beneficiaries of the obligation contained in the Policy are. A determination must also be made regarding the function of the Board in light of its empowering legislation. The obligation not to "privatize" or "contract out" in violation of the Policy is an obligation affecting the entire bargaining unit rather than any individual employee. The dispute between PSAC and the employer arose from the contracting out of the work done by the bargaining unit as an entity, and was concerned with the obligations owed under the Policy to the bargaining unit as a whole. A grievance of this kind could not be sustained by any individual employee. The provisions of the Board's empowering legislation clearly indicated that it would have jurisdiction to consider whether the reference was properly brought before it.

The Board's interpretation of the Policy was not patently unreasonable. The intent of the Policy is that indeterminate employees can rely on the termination of contracting out in order to protect their jobs. While contracting out is not prohibited, the employer had an obligation under the Policy to review and when possible terminate contracting‑out arrangements in order to ensure the continued employment of indeterminate employees within the public service. Rather than attempting to safeguard jobs of indeterminate employees, the employer set out to reduce the number of such employees by contracting out the identical tasks which they were employed to do, contrary to the obligation set out in the Policy. The Board's finding that the employer failed to carry out this obligation cannot be characterized as patently unreasonable, and the Court should not interfere in it.

Per L'Heureux‑Dubé, Gonthier and McLachlin JJ.: Cory J.'s conclusion that the Board did not make a patently unreasonable decision in finding that the appellant contravened the terms of its collective agreement with PSAC was agreed with. However, the standard of review for the Board's decision as to whether or not a matter is properly brought under s. 99 PSSRA is not one of correctness. This is a question within the Board's jurisdiction to which the patently unreasonable standard will apply. Since the section itself does not provide a definitive answer as to whether the legislator intended the question to be within the tribunal's jurisdiction, the Court must consider the other factors that inform the pragmatic and functional approach articulated in Bibeault. The Board's empowering legislation gives it broad and extensive powers, and by according the Board's decisions the protection of a broadly worded privative clause, Parliament made express its intention that these decisions be accorded a great deal of deference. The expertise of the Board and its members also supports the proposition that the grant of jurisdiction in s. 99 was intended to be broad rather than narrow. Further, the question to be answered is one which lies at the centre of the Board's specialized expertise. The question being within jurisdiction, the Board was not patently unreasonable in concluding that the obligation was the type which could properly form the basis of a s. 99 reference, and the Court should therefore defer to its decision.

Cases Cited

By Cory J.

Distinguished: Mudarth v. Canada (Minister of Public Works), [1989] 3 F.C. 371 (T.D.), aff'd (1990), 113 N.R. 159 (F.C.A.); Gonthier v. Canada (1986), 77 N.R. 386; Flieger v. New Brunswick (1991), [125 N.B.R. (2d) 228], leave to appeal granted [1992] 2 S.C.R. vi; referred to: Canadian Union of Public Employees, Local 963 v. New Brunswick Liquor Corp., [1979] 2 S.C.R. 227; Metropolitan Life Insurance Co. v. International Union of Operating Engineers, Local 796, [1970] S.C.R. 425; Bell v. Ontario Human Rights Commission, [1971] S.C.R. 756; Anisminic Ltd. v. Foreign Compensation Commission, [1969] 2 A.C. 147; Syndicat des employés de production du Québec et de l'Acadie v. Canada Labour Relations Board, [1984] 2 S.C.R. 412; U.E.S., Local 298 v. Bibeault, [1988] 2 S.C.R. 1048; Canada (Attorney General) v. Public Service Alliance of Canada, [1991] 1 S.C.R. 614; Bell Canada v. Canada (Canadian Radio‑television and Telecommunications Commission), [1989] 1 S.C.R. 1722; National Corn Growers Assn. v. Canada (Import Tribunal), [1990] 2 S.C.R. 1324; Lester (W.W.) (1978) Ltd. v. United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry, Local 740, [1990] 3 S.C.R. 644; Fraser v. Public Service Staff Relations Board, [1985] 2 S.C.R. 455; Crevier v. Attorney General of Quebec, [1981] 2 S.C.R. 220; CAIMAW v. Paccar of Canada Ltd., [1989] 2 S.C.R. 983; The Queen v. Lavoie, [1978] 1 F.C. 778; Gloin v. Attorney General of Canada, [1978] 2 F.C. 307; Canadian Air Traffic Control Association v. The Queen, [1985] 2 F.C. 84; Transport Guilbault Inc. v. Scott, F.C.A., No. A‑618‑85, May 21, 1986.

By L'Heureux‑Dubé J.

Referred to: Canada (Attorney General) v. Mossop, [1993] 1 S.C.R. 554; U.E.S., Local 298 v. Bibeault, [1988] 2 S.C.R. 1048.

Statutes and Regulations Cited

Federal Court Act, R.S.C., 1985, c. F‑7, s. 28.

Public Service Employment Act, R.S.C., 1985, c. P‑33, s. 29.

Public Service Staff Relations Act, R.S.C., 1985, c. P‑35, ss. 12, 21, 22, 92, 99, 101.

Authors Cited

Shorter Oxford English Dictionary. Oxford: Oxford University Press, 1973, "patently", "unreasonable".

APPEAL from a judgment of the Federal Court of Appeal, [1991] 1 F.C. 428, 124 N.R. 379, affirming a declaration of the Public Service Staff Relations Board on a reference. Appeal dismissed.

Eric A. Bowie, Q.C., and Harvey A. Newman, for the appellant.

Andrew J. Raven, for the respondent.

//Cory J.//

The judgment of Lamer C.J. and Sopinka, Cory and Iacobucci JJ. was delivered by

Cory J. -- Two issues must be resolved on this appeal. First, it must be determined whether the Public Service Staff Relations Board (the "Board") had jurisdiction to determine the reference submitted to it by the respondent. Secondly, if it did have jurisdiction it must be considered whether the Board made a patently unreasonable decision in finding that the appellant contravened the terms of its collective agreement with the respondent in contracting out data capture activities which until then had been performed by the bargaining unit.

Factual Background

On April 18, 1985, the Government of Canada approved a Work Force Adjustment Policy agreed upon by the National Joint Council of the Public Service. The Work Force Adjustment Policy was a comprehensive program designed to facilitate the redeployment and if necessary the re-training of indeterminate employees whose employment status was affected by a lack of work or the discontinuance of government functions. The Policy was subsequently incorporated as a part of the collective bargaining agreement of the respondent. Its terms, therefore, assumed a particular importance and must be set out in some detail.

The Adjustment Policy provides that work force adjustment situations may occur in the Public Service for a variety of reasons, and that as a direct result of such work force adjustment situations, departmental management may decide that the services of one or more indeterminate employees will no longer be required beyond a specific date. The aim of the Adjustment Policy is to minimize the effect of work force adjustment situations on indeterminate employees. Section 1.3 reads:

The purpose of this policy is to minimize the impact of WORK FORCE ADJUSTMENT situations on indeterminate employees and to ensure that, wherever possible, alternate employment opportunities are provided TO AFFECTED EMPLOYEES.

Section 1.8 of the policy states that "[t]he administration of this policy involves the Treasury Board Secretariat (TBS), the Public Service Commission (PSC), departments and agencies, bargaining agents, and employees". It also provides that:

Public Service employees who are affected by WORK FORCE ADJUSTMENTS are not themselves responsible for such situations. Accordingly, it is the responsibility of management to ensure that AFFECTED EMPLOYEES are treated equitably and are given every reasonable opportunity to continue their careers as Public Service employees.

The terms "affected employees" and "work force adjustment" are defined as follows:

AFFECTED EMPLOYEES: Indeterminate employees whose services will no longer be required because of WORK FORCE ADJUSTMENT situations.

WORK FORCE ADJUSTMENT: A situation which occurs when a deputy head or DELEGATED OFFICER decides that the services of one or more indeterminate employees will no longer be required beyond a specified date because of lack of work or because of the discontinuance of a function. A major WORK FORCE ADJUSTMENT situation is one in which ten or more indeterminate employees in a department, in one or more locations, are affected at the same time.

The basic intent of the policy is set out in s. 3 in these words:

... indeterminate employees whose services will no longer be required because of lack of work or the discontinuance of a function and who are suitable for appointment, shall, as far as is practicable, be redeployed to positions in the Public Service ....

The obligation is described as "Roles and Responsibilities" of Departments, and the requirements for Human Resource Planning are set out in ss. 5 and 6 of the Policy in these terms:

5.1 Departments shall:

5.1.2 review their use of employees appointed for specified periods (term employees) and their use of contracted services and should terminate them where such action would facilitate the REDEPLOYMENT of AFFECTED EMPLOYEES, SURPLUS EMPLOYEES, OR LAID-OFF PERSONS;

6. HUMAN RESOURCE PLANNING

6.2 Factors to consider in developing a human resource plan include, but are not restricted to, the following:

(d) placement possibilities through the termination of specified period appointments and/or contracts for services;

The Work Force Adjustment Policy was incorporated into a Master Agreement between the Treasury Board and the respondent, which was to come to an end on June 30, 1988. The Master Agreement formed part of the collective agreement governing the data processors employed by the Department of National Revenue, Customs and Excise.

In May 1985, the Minister of Finance called for the reduction of 15,000 person years from the Public Service over a five-year period. The Department of National Revenue, Customs and Excise, in order to reduce person-years, contracted out the work performed by 270 data processors employed in various locations throughout Canada.

The respondent PSAC filed a "reference" pursuant to what is now s. 99 of the Public Service Staff Relations Act, R.S.C., 1985, c. P-35 ("PSSRA"). It alleged that the contracting out of data capture services was contrary to ss. 5.1.2 and 6.2(d) of the Work Force Adjustment Policy and accordingly was contrary to art. M-37.03(28) of the Master Collective Agreement between the parties. In essence, the respondent's position was that the Department was prohibited from contracting out services if that resulted in an outcome that contravened the Work Force Adjustment Policy that was part of the Collective Agreement.

The appellant raised a preliminary objection to that reference and argued that the Public Service Staff Relations Board had no jurisdiction in the matter. In a preliminary decision dated June 23, 1989, the Board concluded it had jurisdiction to hear the reference and dismissed the objection. In its final decision, dated March 13, 1990, the Board ruled in favour of the respondent. Pursuant to s. 28 of the Federal Court Act, R.S.C., 1985, c. F-7, as amended, the appellant brought an appeal from this decision to the Federal Court of Appeal. That appeal was dismissed: [1991] 1 F.C. 428, 124 N.R. 379.

Decisions Below

Public Service Staff Relations Board

The Board found that it had jurisdiction to deal with the reference. It determined that there were two procedures for hearing a matter respecting the interpretation of collective agreements. The first was described in what is now s. 92 PSSRA, which applied to individual grievances of employees. The second grievance procedure was outlined in s. 99 and it dealt with the hearing of what could be called policy grievances. The Board concluded that the problem presented on the reference was of a general nature dealing with matters of policy and as a result that the grievance belonged to the bargaining agent and not to individual employees. The obligation of the employer which the respondent sought to enforce was owed not to an individual employee but rather to the employees as a whole. Thus an employee could not have asked for the enforcement of the employer's obligation to "review the use of contracted services".

On the substantive issue, the Board found that the purpose of the Policy was to protect indeterminate employees from the consequences of major changes to the structure of the federal Public Service. The Board found that the data capture initiative which brought in contract employees was contrary to the collective agreement. It expressed the view that, under the Policy, the employer had an obligation to review and when possible terminate contracting out arrangements in order to ensure the continued employment of indeterminate employees within the Public Service. This it failed to do.

Federal Court of Appeal, [[1991] 1 F.C. 428](https://www.canlii.org/en/ca/fca/doc/1990/1990canlii12972/1990canlii12972.html)

On the issue of jurisdiction, Mahoney J.A., for the majority, held that although the Board improperly used the expression "policy grievance", it had properly decided that it had jurisdiction to deal with the issue raised in the reference. That grievance went beyond the obligation owed to any individual employee and essentially dealt with the "very existence" of the bargaining unit.

The majority also found that the Board's conclusion on the substantive issue was supported by the evidence. Mahoney J.A. agreed that the employer had acted in a manner that was contrary to both the letter and spirit of the Work Force Adjustment Policy. He noted that the purpose was to facilitate redeployment of affected, surplus or laid-off personnel. To this end, the Policy contemplated that the employer would review and terminate its use of contracted services when it would affect indeterminate employees. The Policy did not authorize the creation of affected, surplus or laid-off employees by means of contracting out the very same jobs that they were performing.

In his minority reasons, Pratte J.A. dealt only with the issue of jurisdiction. He came to the conclusion that the Board did not have jurisdiction to determine the matter raised in the reference. In his view, s. 5.1 of the Work Force Adjustment Policy indicated that the employer's "obligation not to contract out services so as to cause prejudice to indeterminate employees ... was clearly incurred for the sole benefit of those employees" (pp. 435-36). Therefore, the question referred to the Board on the reference could not come under s. 99(1) PSSRA because it related to an obligation the enforcement of which might be the subject of grievances by the individual employees concerned.

Applicable Legislation

The Board is created by virtue of the PSSRA. Sections 11 through 27 set out the constitution, powers and duties of the Board. The members of the Board are appointed by the Governor in Council with security of tenure subject only to good behaviour (s. 12). The appointments to the Board are made from lists of applicants supplied by both the employer and the bargaining agent to the Chairman. Thus the statute has gone far to assure the independence and expertise of Board members and ensure that the parties to its decisions will have confidence in them.

The decisions of the Board are protected by a broadly worded privative clause. Section 101 PSSRA states:

101. (1) Except as provided in this Act, every order, award, direction, decision, declaration or ruling of the Board, an arbitrator appointed under section 63, or an adjudicator is final and shall not be questioned or reviewed in any court.

(2) No order shall be made or process entered, or proceedings taken in any court, whether by way of injunction, certiorari, prohibition, quo warranto or otherwise, to question, review, prohibit or restrain the Board, an arbitrator appointed under section 63 or an adjudicator in any of the proceedings of the Board, arbitrator or adjudicator.

This privative clause was included by Parliament explicitly to ensure that decisions of the Board should be final and conclusive and that courts should not have the power to interfere with them at will.

Parliament has given the Board broad powers to consider and resolve a wide variety of problems that arise in the field of labour relations. For example, s. 21 PSSRA provides that the Board may make orders regarding compliance with the entire Act and regulations made thereunder. Furthermore, s. 22 gives the Board wide powers to make regulations on a number of issues including the determination of units appropriate for collective bargaining. Parliament has clearly placed its trust and confidence in the Board and sought to protect its decisions in the sensitive and volatile area of labour disputes. The PSSRA has provided a Board composed of experts in the field of labour-management relations. The aim and object of the Board are to resolve disputes that may arise between the federal government and its employees. If the Board is to achieve this goal, its decisions must be speedy and final. To achieve the end of finality so necessary in this field, the decisions of the Board have been given the protection of a broad privative clause. It should never be forgotten that it is Parliament that has designed a Board of experts to resolve the disputes between labour and management as quickly and as finally as possible. Courts should not be quick to interfere in the Board's decisions.

It will be helpful to keep in mind the general aims of the legislation as well as the particular provisions of the PSSRA when consideration is given to the issues arising in this appeal.

Courts and Administrative Tribunals

In a complex society such as ours administrative boards and tribunals are increasingly necessary. The experience and expert knowledge of some boards surpasses that of the courts. They provide a mechanism for speedy resolution of complex, and frequently technical, matters. The tribunals, generally composed of experts in their fields, act independently of the government. Two prime examples where the expertise of an administrative body is invaluable are the fields of labour relations and energy.

The position of the courts with respect to administrative tribunals has evolved in three stages. The first stage is composed of cases decided prior to the decision of this Court in Canadian Union of Public Employees, Local 963 v. New Brunswick Liquor Corp., [1979] 2 S.C.R. 227 ("CUPE"). The second stage is marked by the CUPE decision itself and the principle outlined within. The final stage is those cases decided subsequent to CUPE.

Pre-CUPE Cases

The cases prior to the CUPE decision are marked by the extent of control of the so-called inferior tribunals exercised by the courts. This was manifested by their eagerness to substitute their opinions for that of the administrative board. Examples of this position include Metropolitan Life Insurance Co. v. International Union of Operating Engineers, Local 796, [1970] S.C.R. 425, and Bell v. Ontario Human Rights Commission, [1971] S.C.R. 756. Each of these cases followed the principle set out in Anisminic Ltd. v. Foreign Compensation Commission, [1969] 2 A.C. 147. They took the position that a definition of jurisdictional error should include any question pertaining to the interpretation of a statute made by an administrative tribunal. In each case this Court substituted its own opinion of the correct interpretation of the statute for that of the administrative tribunal. These cases significantly expanded the scope of judicial review.

CUPE

The CUPE decision involved a complaint with the Public Service Labour Relations Board alleging that the employer was replacing striking employees with management personnel contrary to the Public Service Labour Relations Act, R.S.N.B. 1973, c. P-25, which provided that during a strike "the employer shall not replace the striking employees or fill their position with any other employee". At issue was the jurisdiction of the Board to interpret the meaning of the term "other employee". Dickson J. (as he then was), writing for the Court, noted that the section in question was ambiguous. He then set out the rationale for protecting decisions of administrative tribunals which were made within their jurisdiction. He wrote at pp. 235-36:

The labour board is a specialized tribunal which administers a comprehensive statute regulating labour relations. In the administration of that regime, a board is called upon not only to find facts and decide questions of law, but also to exercise its understanding of the body of jurisprudence that has developed around the collective bargaining system, as understood in Canada, and its labour relations sense acquired from accumulated experience in the area.

The usual reasons for judicial restraint upon review of labour board decisions are only reinforced in a case such as the one at bar. Not only has the Legislature confided certain decisions to an administrative board, but to a separate and distinct Public Service Labour Relations Board. That Board is given broad powers -- broader than those typically vested in a labour board -- to supervise and administer the novel system of collective bargaining created by the Public Service Labour Relations Act. The Act calls for a delicate balance between the need to maintain public services, and the need to maintain collective bargaining. Considerable sensitivity and unique expertise on the part of Board members is all the more required if the twin purposes of the legislation are to be met.

Dickson J. then went on to say that "not only would the Board not be required to be `correct' in its interpretation, but one would think that the Board was entitled to err and any such error would be protected from review by the privative clause" (p. 236).

What then is the appropriate standard? The decision must be "more" than wrong. As Dickson J. stated in CUPE at p. 237:

Did the Board here so misinterpret the provisions of the Act as to embark on an inquiry or answer a question not remitted to it? Put another way, was the Board's interpretation so patently unreasonable that its construction cannot be rationally supported by the relevant legislation and demands intervention by the court upon review? [Emphasis added.]

The result of the CUPE decision is that when an administrative tribunal is acting within its jurisdiction it will lose jurisdiction only if it acts in a patently unreasonable manner. This principle has been consistently applied in subsequent decisions.

Post-CUPE Decisions

In particular two cases in which Beetz J. wrote the decisions for the Court have been influential. In Syndicat des employés de production du Québec et de l'Acadie v. Canada Labour Relations Board, [1984] 2 S.C.R. 412, the employer made an application to the Canada Labour Relations Board ("CLRB") alleging that the union was authorizing an unlawful strike by employees who were engaging in a concerted refusal to work overtime. The employer asked the CLRB to declare the strike unlawful and to issue a cease and desist order against the union. The CLRB held that the employees' actions did indeed amount to a strike regardless of whether the collective agreement gave the employer the power to require employees to work overtime or not. The CLRB's order required the workers to call off the refusal to work overtime and referred to an arbitrator the issue as to whether, on a correct interpretation of the collective agreement, overtime was compulsory.

The union sought a review of the finding that the overtime ban was illegal and took the position that the CLRB had committed a jurisdictional error by incorrectly answering the question as to whether a refusal to work overtime constituted a strike.

Beetz J. enunciated a distinction between errors made by a tribunal while acting within its jurisdiction to determine the issue before it and errors made in determining whether it had jurisdiction to consider the issue before it. The tribunal need only make a decision which is not patently unreasonable, following CUPE. However, on the issue of jurisdiction the standard of deference will be much lower. On that question, the tribunal must be correct, that is, it will have made a reviewable error if its decision is merely incorrect. Beetz J. explained, at pp. 420-21:

A jurisdictional error results generally in an excess of jurisdiction or a refusal to exercise jurisdiction, whether at the start of the hearing, during it, in the findings or in the order disposing of the matter. Such an error, even if committed in the best possible good faith, will result nonetheless in the decision containing it being set aside...

In U.E.S., Local 298 v. Bibeault, [1988] 2 S.C.R. 1048, Beetz J., writing for the Court, further expanded the Court's position as set out in L'Acadie. In examining the issue of curial deference Beetz J. came to the conclusion that CUPE does not stand for the proposition that only those errors that are patently unreasonable can give rise to an excess of jurisdiction. He set out the two instances in which an administrative tribunal will have exceeded its jurisdiction in this way, at p. 1086:

1. if the question of law at issue is within the tribunal's jurisdiction, it will only exceed its jurisdiction if it errs in a patently unreasonable manner; a tribunal which is competent to answer a question may make errors in so doing without being subject to judicial review;

2. if however the question at issue concerns a legislative provision limiting the tribunal's powers, a mere error will cause it to lose jurisdiction and subject the tribunal to judicial review.

To summarize, therefore: on the question of its jurisdiction to entertain the complaint put before it, if the Board made a simple error it has exceeded its jurisdiction.

The court when considering whether a Board has made a simple error on the issue of its own jurisdiction should adopt what Beetz J. called the "pragmatic and functional" approach. This he described at pp. 1088-89:

The formalistic analysis of the preliminary or collateral question theory is giving way to a pragmatic and functional analysis, hitherto associated with the concept of the patently unreasonable error. At first sight it may appear that the functional analysis applied to cases of patently unreasonable error is not suitable for cases in which an error is alleged in respect of a legislative provision limiting a tribunal's jurisdiction. The difference between these two types of error is clear: only a patently unreasonable error results in an excess of jurisdiction when the question at issue is within the tribunal's jurisdiction, whereas in the case of a legislative provision limiting the tribunal's jurisdiction, a simple error will result in a loss of jurisdiction. It is nevertheless true that the first step in the analysis necessary in the concept of a "patently unreasonable" error involves determining the jurisdiction of the administrative tribunal. At this stage, the Court examines not only the wording of the enactment conferring jurisdiction on the administrative tribunal, but the purpose of the statute creating the tribunal, the reason for its existence, the area of expertise of its members and the nature of the problem before the tribunal. At this initial stage a pragmatic or functional analysis is just as suited to a case in which an error is alleged in the interpretation of a provision limiting the administrative tribunal's jurisdiction: in a case where a patently unreasonable error is alleged on a question within the jurisdiction of the tribunal, as in a case where simple error is alleged regarding a provision limiting that jurisdiction, the first step involves determining the tribunal's jurisdiction.

This approach has been reaffirmed by this Court most recently in the reasons of Sopinka J., writing for the majority, in Canada (Attorney General) v. Public Service Alliance of Canada, [1991] 1 S.C.R. 614.

However, with respect to the substantive question before the tribunal, the post-CUPE case law has not altered the position taken by Dickson J. in CUPE. In L'Acadie, Beetz J. confirmed the CUPE standard, stating at pp. 419‑20:

It should be recalled that privative clauses like those resulting from the combined effect of these last two provisions do not confer a right of appeal. They do not empower the court undertaking the review to make the decision which an administrative tribunal like the Board should have made, though they allow it to indicate in some cases what it should have done and to refer the case back to it for action accordingly. They do not even empower the court to set aside the decision of an administrative tribunal because of a mere error of law. If the Board commits such an error, its decision remains unassailable. [Emphasis added.]

Further, although Bibeault articulated the so-called pragmatic and functional approach, it carefully emphasized that the CUPE standard was to be used when a court considered a decision made by a board within its jurisdiction. Beetz J. noted at p. 1086:

... if the question of law at issue is within the tribunal's jurisdiction, it will only exceed its jurisdiction if it errs in a patently unreasonable manner; a tribunal which is competent to answer a question may make errors in so doing without being subject to judicial review;

Similarly, in Bell Canada v. Canada (Canadian Radio-television and Telecommunications Commission), [1989] 1 S.C.R. 1722, Gonthier J. stated the principle of curial deference as follows, at p. 1744:

Where the legislator has clearly stated that the decision of an administrative tribunal is final and binding, courts of original jurisdiction cannot interfere with such decisions unless the tribunal has committed an error which goes to its jurisdiction. Thus, this Court has decided in the CUPE case that judicial review cannot be completely excluded by statute and that courts of original jurisdiction can always quash a decision if it is "so patently unreasonable that its construction cannot be rationally supported by the relevant legislation and demands intervention by the court upon review" (p. 237). Decisions which are so protected are, in that sense, entitled to a non-discretionary form of deference because the legislator intended them to be final and conclusive and, in turn, this intention arises out of the desire to leave the resolution of some issues in the hands of a specialized tribunal.

Gonthier J. then went on to say, at p. 1746:

... within the context of a statutory appeal from an administrative tribunal, additional consideration must be given to the principle of specialization of duties. Although an appeal tribunal has the right to disagree with the lower tribunal on issues which fall within the scope of the statutory appeal, curial deference should be given to the opinion of the lower tribunal on issues which fall squarely within its area of expertise.

The Court again enunciated the limited role of superintending courts in National Corn Growers Assn. v. Canada (Import Tribunal), [1990] 2 S.C.R. 1324. In his majority judgment Gonthier J. stated at pp. 1369-70:

... courts, in the presence of a privative clause, will only interfere with the findings of a specialized tribunal where it is found that the decision of that tribunal cannot be sustained on any reasonable interpretation of the facts or of the law.

In her reasons, concurred in by Dickson C.J. and Lamer C.J., Wilson J. emphasized the rationale behind curial deference towards tribunals with particular specialization in a field, at p. 1336:

Canadian courts have struggled over time to move away from the picture that Dicey painted toward a more sophisticated understanding of the role of administrative tribunals in the modern Canadian state. Part of this process has involved a growing recognition on the part of courts that they may simply not be as well equipped as administrative tribunals or agencies to deal with issues which Parliament has chosen to regulate through bodies exercising delegated power, e.g., labour relations, telecommunications, financial markets and international economic relations. Careful management of these sectors often requires the use of experts who have accumulated years of experience and a specialized understanding of the activities they supervise.

Courts have also come to accept that they may not be as well qualified as a given agency to provide interpretations of that agency's constitutive statute that make sense given the broad policy context within which that agency must work. Evans et al. point out, for example, that "[o]ne of the most important developments in contemporary public law in Canada has been a growing acceptance by the courts of the idea that statutory provisions often do not yield a single, uniquely correct interpretation, but can be ambiguous or silent on a particular question, or couched in language that obviously invites the exercise of discretion ...

In Lester (W.W.) (1978) Ltd. v. United Association of Journeymen and Apprentices of the Plumbing and Pipefitting Industry, Local 740, [1990] 3 S.C.R. 644, at pp. 669-70, McLachlin J., writing for the majority, reaffirmed the patently unreasonable test:

Courts should exercise caution and deference in reviewing the decisions of specialized administrative tribunals, such as the Labour Board in this case. This deference extends both to the determination of the facts and the interpretation of the law. Only where the evidence, viewed reasonably, is incapable of supporting a tribunal's findings of fact, or where the interpretation placed on the legislation is patently unreasonable, can the court interfere. As Dickson J. (as he then was) put it in [CUPE] ... at pp. 235-36, referring to the privative clause in the Public Service Labour Relations Act, R.S.N.B. 1973, c. P-25:

[the clause] constitutes a clear statutory direction on the part of the Legislature that public sector labour matters be promptly and finally decided by the Board. Privative clauses of this type are typically found in labour relations legislation. The rationale for protection of a labour board's decisions within jurisdiction is straightforward and compelling. [Emphasis added.]

In expressing the reluctance courts should feel in interfering in decisions of administrative tribunals, McLachlin J. echoed the dicta of Dickson C.J. in Fraser v. Public Service Staff Relations Board, [1985] 2 S.C.R. 455. Writing for a unanimous Court Dickson C.J. stated at pp. 464-65:

A restrained approach to disturbing the decisions of specialized administrative tribunals, particularly in the context of labour relations, is essential if the courts are to respect the intentions and policies of Parliament and the provincial legislatures in establishing such tribunals....

A reviewing court, whether under s. 28(1)(b) of the Federal Court Act, or under the common law principles of judicial review, should not interfere with the decision of a statutory decision maker in a case such as this unless the statutory decision maker makes a mistake of law, such as addressing his or her mind to the wrong question, applying the wrong principle, failing to apply a principle he or she would have applied, or incorrectly applying a legal principle. [Emphasis added.]

In summary, the courts have an important role to play in reviewing the decisions of specialized administrative tribunals. Indeed, judicial review has a constitutional foundation. See Crevier v. Attorney General of Quebec, [1981] 2 S.C.R. 220. In undertaking the review courts must ensure first that the board has acted within its jurisdiction by following the rules of procedural fairness, second, that it acted within the bounds of the jurisdiction conferred upon it by its empowering statute, and third, that the decision it reached when acting within its jurisdiction was not patently unreasonable. On this last issue, courts should accord substantial deference to administrative tribunals, particularly when composed of experts operating in a sensitive area.

Why Should There be Deferential Treatment of This Board by the Courts?

There are a number of reasons why the decisions of the Board made within its jurisdiction should be treated with deference by the court. First, Parliament in the Act creating the Board has by the privative clause indicated that the decision of the Board is to be final. Secondly, recognition must be given to the fact that the Board is composed of experts who are representative of both labour and management. They are aware of the intricacy of labour relations and the delicate balance that must be preserved between the parties for the benefit of society. These experts will often have earned by their merit the confidence of the parties. Each time the court interferes with a decision of such a tribunal confidence is lost not only by parties which must appear before the Board but by the community at large. Further, one of the greatest advantages of the Board is the speed in which it can hold a hearing and render a decision. If courts were to interfere with decisions of the Board on a routine basis, victory would always go to the party better able to afford the delay and to fund the endless litigation. The court system itself would suffer unacceptable delays resulting from the increased case load if it were to attempt to undertake a routine review.

None of this is to say that some form of review is not salutary and necessary. Certainly, the courts are eminently well suited for determining whether the Board has exceeded the jurisdiction which is granted to it by its enabling statute. Further, the courts are in the best position to determine whether there has been such an error in the procedure followed by it that there has been a denial of natural justice which would result in a loss of jurisdiction by the tribunal. As well, all parties have the right to be protected from a decision that is patently unreasonable. Beyond that the courts need not and should not go. A board which is created and protected by a privative clause is the manifestation of the will of Parliament to create a mechanism that provides a speedy and final means of achieving the goal of fair resolution of labour‑management disputes. To serve its purpose these decisions must as often as possible be final. If the courts were to refuse to defer to the decisions of the Board, they would negate both the very purpose of the Act and its express provisions.

What Constitutes a "Patently Unreasonable" Decision?

It is said that it is difficult to know what "patently unreasonable" means. What is patently unreasonable to one judge may be eminently reasonable to another. Yet any test can only be defined by words, the building blocks of all reasons. Obviously, the patently unreasonable test sets a high standard of review. In the Shorter Oxford English Dictionary "patently", an adverb, is defined as "openly, evidently, clearly". "Unreasonable" is defined as "[n]ot having the faculty of reason; irrational. . . . Not acting in accordance with reason or good sense". Thus, based on the dictionary definition of the words "patently unreasonable", it is apparent that if the decision the Board reached, acting within its jurisdiction, is not clearly irrational, that is to say evidently not in accordance with reason, then it cannot be said that there was a loss of jurisdiction. This is clearly a very strict test.

In CAIMAW v. Paccar of Canada Ltd., [1989] 2 S.C.R. 983, La Forest J. (Dickson C.J. concurring) laid out the strict test of review, at p. 1003:

Where, as here, an administrative tribunal is protected by a privative clause, this Court has indicated that it will only review the decision of the Board if that Board has either made an error in interpreting the provisions conferring jurisdiction on it, or has exceeded its jurisdiction by making a patently unreasonable error of law in the performance of its function.

It is not enough that the decision of the Board is wrong in the eyes of the court; it must, in order to be patently unreasonable, be found by the court to be clearly irrational.

Application of These Principles to the Facts of This Case

Jurisdiction to Entertain the Reference Under Section 99

The first question that must be answered is whether the Board had jurisdiction to entertain the respondent's reference under s. 99 PSSRA, or whether, as the appellant submits, the only mechanism for challenging the appellant's actions was by way of individual grievances by employees affected under s. 92. It is clear from the Bibeault decision that the Board must have been correct in its determination of this issue. If it is not, it will have committed a jurisdictional error. In my opinion, the decision the Board made with regard to its jurisdiction to hear and determine the reference was correct.

The legislative provisions that must be considered in determining whether the Board properly assumed jurisdiction are found in the PSSRA, particularly:

92. (1) Where an employee has presented a grievance, up to and including the final level in the grievance process, with respect to

(a) the interpretation or application in respect of the employee of a provision of a collective agreement or an arbitral award, or

(b) disciplinary action resulting in discharge, suspension or a financial penalty,

and the grievance has not been dealt with to the satisfaction of the employee, the employee may, subject to subsection (2), refer the grievance to adjudication.

99. (1) Where the employer and a bargaining agent have executed a collective agreement or are bound by an arbitral award and the employer or the bargaining agent seeks to enforce an obligation that is alleged to arise out of the agreement or award, and the obligation, if any, is not one the enforcement of which may be the subject of a grievance of an employee in the bargaining unit to which the agreement or award applies, either the employer or the bargaining agent may, in the prescribed manner, refer the matter to the Board.

(2) Where a matter is referred to the Board pursuant to subsection (1), the Board shall hear and determine whether there is an obligation as alleged and whether, if there is, there has been a failure to observe or to carry out the obligation.

(3) The Board shall hear and determine any matter referred to it pursuant to subsection (1) as though the matter were a grievance, and subsection 96(2) and sections 97 and 98 apply to the hearing and determination of that matter.

According to Paccar, supra, the functional approach described in Bibeault, supra, must be used by the courts when reviewing the decisions of administrative tribunals on questions relating to their jurisdiction. The functional approach requires that consideration be given to who the intended beneficiaries of the obligation contained in the Work Force Adjustment Policy are. Further, a determination must be made regarding the function of the Board in light of its empowering legislation. If the beneficiary of the obligation is the bargaining unit as a whole, then the Board was correct in assuming jurisdiction under s. 99. However, if the beneficiary of the obligation is individual workers, then it is up to those individual workers to grieve pursuant to s. 92 and jurisdiction under s. 99 would be ousted.

The obligation not to "privatize" or "contract out" in violation of the Work Force Adjustment Policy is an obligation affecting the entire bargaining unit rather than any individual employee. This is true even though these steps would substantially affect individual employees. The appellant argues that the individual employees affected would be able to grieve the loss of their employment because of contracting out and that therefore the Board did not have jurisdiction to hear the s. 99 reference. In support of this position the appellant cites three decisions of the Federal Court of Appeal: The Queen v. Lavoie, [1978] 1 F.C. 778; Gloin v. Attorney General of Canada, [1978] 2 F.C. 307; Canadian Air Traffic Control Association v. The Queen, [1985] 2 F.C. 84. In his dissent Pratte J.A. cites Lavoie, supra, and Gloin, supra. These cases were all carefully considered by Mahoney J.A., writing for the majority.

While I do not dispute the contention that a former employee retains the right to grieve his dismissal, in my view these cases are of no assistance in the present appeal. I agree with Mahoney J.A. that the nature of the relief sought is relevant in deciding whether the proceeding should be undertaken by an individual employee or the bargaining unit. The dispute between the bargaining agent PSAC and the employer represented by the Attorney General of Canada arose from the contracting out of the work done by the bargaining unit as an entity. It was concerned with the obligations owed to the bargaining unit as a whole under the Work Force Adjustment Policy. A grievance of this kind could not be sustained by any individual employee. Nor could an individual employee enforce the relief sought in this case. For example, those grievances that were taken by individual employees arising out of the privatization of the work done by members of the bargaining unit did not challenge the obligation relating to contracting out of services. Rather, the individual employees, in their grievances, dealt with issues relating specifically to them, such as complaints with respect to their training. My reading of the Work Force Adjustment Policy indicates that it is the entire group of employees that is to benefit from its provisions. Certainly each individual employee will derive benefits through the group, but it is the employees as a whole, that is to say the union or association of employees, to which the policy benefits are directed.

This Court considered the function of the Public Service Staff Relations Board in Canada (Attorney General) v. Public Service Alliance of Canada, supra. At pp. 659-63 I considered its role and the scope of curial deference which should be accorded to it. In that case, I noted, at pp. 659-60:

... the Board is given broad powers to consider and resolve a wide variety of problems that arise in the field of labour relations. The decisions of the Board are protected by a privative clause. The legislators clearly placed their trust and confidence in the Board and sought to protect its decisions in the sensitive domain of labour matters.... The purpose of the Staff Relations Act is to provide the means for achieving the speedy resolution of disputes between labour and management. In reaching its decisions, the Board will make use of the special skills of its members who are experienced and knowledgeable in the field of labour relations generally and particularly as labour relations issues existing between the Public Service and the Federal Government.

And further at p. 661:

It is apparent the Board's raison d'être is the resolution of labour management disputes that may erupt between the Federal Government and its employees. The area of expertise of the Board is in the field of labour relations involving the Federal Government and its employees.

The Board has been given wide powers and the protection of a privative clause. Its members are experienced and skilled in the field of labour relations. The legislator made it clear that labour disputes, such as those presented in this case, were to be resolved by the Board. The Court should not be quick to interfere.

These statements were not rejected by Sopinka J. writing for the majority. At page 628 of his reasons, he confirmed that with regard to the standard of review he was in general agreement with the principle I had put forward.

A consideration of the Board's empowering legislation makes it clear that it has been given extensive powers to consider and resolve a wide variety of labour problems. The Board's decisions are protected by a broadly worded privative clause. Parliament has clearly put its trust in the Board to deal with issues arising in the sensitive domain of labour relations within the public service. The Board's members are experienced and skilled in the field of labour relations. Sections 92 and 99 of the Act set out the basis for and the parameters of the jurisdiction of the Board. In the sense that these sections define the jurisdiction of the Board with regard to the matters they describe, the Board had to be correct that it had the jurisdiction to consider the issues presented to it on the reference. In my view, the Board was correct in finding that the provisions of its empowering legislation clearly indicated that it would have jurisdiction to consider this very issue.

On the first issue, I would find that the Board correctly assumed jurisdiction. It now remains to be decided if its determination of the issue of the violation of the collective agreement was patently unreasonable.

Was The Decision of the Board Patently Unreasonable?

Interpretation of the Work Force Adjustment Policy

In this case the contract employees did the same work, on the same equipment, in the same premises as had the union employees. However, it must be emphasized that this case does not deal with the right of the employer to contract out the work. This right has been recognized by the parties, by the Board in its decision and by the majority of the Federal Court of Appeal. What must be determined is whether, in the circumstances, the employer complied with the obligations it undertook by the terms of the Work Force Adjustment Policy.

The interpretation of the Work Force Adjustment Policy by the Board was not patently unreasonable or, put another way, clearly irrational. The appellant contended that the Board's decision in finding that any act of privatization or contracting out is contrary to the spirit of and logically inconsistent with the policy was patently unreasonable. Yet, the Board's decision does not in fact prevent contracting out. The issue before the Board was whether the contracting out of services in the circumstances of this case constituted a violation of the Work Force Adjustment Policy which was incorporated into the Master Agreement.

The Policy sets out a comprehensive series of job security protections based upon the parties' clear intention to preserve the employment status of public servants, particularly those public servants who are indeterminate employees, whenever possible. The most important parts of the Policy to be considered for these purposes are these which I will set out again here for ease of reference:

1. INTRODUCTION

1.1 WORK FORCE ADJUSTMENT situations may occur in the Public Service. Reasons may include, but are not restricted to, expenditure constraints, new legislation, program changes, reorganizations, technological change, productivity improvement, elimination or reduction of programs, cessation or reduction of operations in one or more locations, decentralization, relocation, privatization of government programs, and transfer of programs to other levels of government or interest groups.

1.2 As a direct result of a WORK FORCE ADJUSTMENT situation, a deputy head may decide that the services of one or more indeterminate employees will no longer be required beyond a specified date because of lack of work or because of the discontinuance of a function.

1.3 The purpose of this policy is to minimize the impact of WORK FORCE ADJUSTMENT situations on indeterminate employees and to ensure that, wherever possible, alternate employment opportunities are provided TO AFFECTED EMPLOYEES.

2. DEFINITIONS

REDEPLOYMENT: The appointment of an AFFECTED EMPLOYEE, a SURPLUS EMPLOYEE, or a LAID-OFF PERSON to a position for which he or she is QUALIFIED.

WORK FORCE ADJUSTMENT: A situation which occurs when a deputy head or DELEGATED OFFICER decides that the services of one or more indeterminate employees will no longer be required beyond a specified date because of lack of work or because of the discontinuance of a function. . .

3. POLICY

It is the policy of the Treasury Board that indeterminate employees whose services will no longer be required because of lack of work or the discontinuance of a function and who are suitable for appointment, shall, as far as is practicable, be redeployed to positions in the Public Service which are or which become vacant and for which they are qualified in the opinion of the PSC or for which they would be able to qualify with RETRAINING under specified conditions (see Section 8). Departments shall endeavour to provide at least six months' surplus notice but, with the prior approval of the Secretary of the Treasury Board, may provide less than six months', but not less than four months', surplus notice.

5. ROLES AND RESPONSIBILITIES

5.1 Departments shall:

5.1.2 review their use of employees appointed for specified periods (term employees) and their use of contracted services and should terminate them where such action would facilitate the REDEPLOYMENT of AFFECTED EMPLOYEES, SURPLUS EMPLOYEES, OR LAID-OFF PERSONS;

6. HUMAN RESOURCE PLANNING

6.2 Factors to consider in developing a human resource plan include, but are not restricted to, the following:

(d) placement possibilities through the termination of specified period appointments and/or contracts for services;

While the Policy does not require termination of contracting out in general, the Policy is not silent on this issue either. Section 5.1.2 deals specifically with termination of contract services. The English version expressly states that certain contracts "should" be terminated in certain situations. The French version is even stronger. It states:

5. RÔLES ET RESPONSABILITÉS

5.1 Les ministères doivent:

5.1.2 revoir la façon dont ils utilisent les services des employés nommés pour une période déterminée et les marchés de services, et y mettre fin si cela est de nature à faciliter la RÉAFFECTATION des EMPLOYÉS TOUCHÉS, des EMPLOYÉS EXCÉDENTAIRES et des PERSONNES MISES EN DISPONIBILITÉ; [Emphasis added.]

According to the French version of s. 5.1.2 certain contracts "must" ("doivent") be terminated in those circumstances. At the very least contracting out must be scrutinized according to the Policy. It is equally clear that there are some restrictions attached to a decision to use contract services. I agree with the decision of the Board that the intent of the Policy is that indeterminate employees can rely on the termination of contracting out in order to protect their jobs. It certainly cannot be said that the Board's interpretation was patently unreasonable.

The appellant argues that s. 29 of the Public Service Employment Act, R.S.C., 1985, c. P-33, is pertinent to this case. It reads:

29. (1) Where the services of an employee are no longer required because of lack of work or because of the discontinuance of a function, the deputy head, in accordance with the regulations of the Commission, may lay off the employee.

Yet the right to lay off employees is confirmed in the Policy. It provides that workers may be laid off in the event that there is a genuine lack of work or discontinuance of function. The appellant contends that contracting out can be considered a discontinuance of function and relies upon Mudarth v. Canada (Minister of Public Works), [1989] 3 F.C. 371 (T.D.), aff'd (1990), 113 N.R. 159 (F.C.A.), and Gonthier v. Canada (1986), 77 N.R. 386 (F.C.A.). Neither of these cases dealt specifically with the issue of contracting out. Rather, in both, departments within the federal public service were reduced in size resulting in legitimate lay-offs under s. 29. As a result, neither case is particularly helpful in resolving the case at bar.

Flieger v. New Brunswick (1991), [125 N.B.R. (2d) 228], leave to appeal granted [1992] 2 S.C.R. vi, dealt with two highway patrolmen who were laid off following the contracting out of highway patrol functions to the RCMP. The New Brunswick Court of Appeal had to consider s. 26(1) of the Civil Service Act, S.N.B. 1984, c. C-5.1, which states:

26(1) When the services of an employee are no longer required because of lack of work or because of the discontinuance of a function, the deputy head, in accordance with regulations made by the Board, may lay off the employee. [Emphasis added.]

The Court noted the similarity of s. 26 of the New Brunswick Act to s. 29 of the federal Public Service Employment Act and held that there had been a discontinuance of function. However, that case as well can be distinguished. In Flieger the officers were not subject to a collective agreement. The New Brunswick Court of Appeal did not accept a distinction between the use of internal workers to replace terminated employees and the contracting out to external workers. Yet it stated that this argument might perhaps have been accepted had there been a collective agreement which restricted contracting out work. Such was not the case in Flieger but is obviously the situation on the facts before us.

Flieger does cite one relevant case, Transport Guilbault Inc. v. Scott, F.C.A., No. A-618-85, May 21, 1986, leave to appeal refused [1987] 1 S.C.R. xiii. In that case the Federal Court of Appeal interpreted the meaning of "discontinuance of function" as used in s. 61.5(3) of the Canada Labour Code, R.S.C. 1970, c. L-1, which provides:

61.5...

(3) No complaint shall be considered by an adjudicator under subsection (8) in respect of a person where

(a) the person has been laid off because of lack of work or because of the discontinuance of a function;...

The adjudicator had held that a discontinuance of function could not result from a decision by an employer to contract out work. In overturning this decision Pratte J.A. stated:

The discontinuance of a function within the meaning of s. 61.5(3)(a) is discontinuance of a function within a given employer's business. Such discontinuance may result from a decision made by the employer to give work done till then by its employees to a contractor. Provided that decision is genuine and there is nothing artificial about it, s. 61.5(3)(a) cannot be interpreted otherwise without unduly limiting the employer's freedom to plan and organize its business as it wishes.

In my opinion, there is nothing in the Board's interpretation which is inconsistent with this judgment. Neither the Board in the present case, nor the decision of Mahoney J.A. in the Court of Appeal, held that the Work Force Adjustment Policy precluded contracting out. Section 29 will undoubtedly apply to some instances of contracting out. However, in the present case the so-called contracted employees engaged in exactly the same work, on the same premises, with the same equipment, and carried out the very same instructions as had the indeterminate employees prior to the contracting out. The only change was that the new employer was now the contractor rather than the Public Service. This, in my opinion, cannot constitute a discontinuance of function. This however does not mean that there could not be cases of contracting out that would legitimately comprise a discontinuance of function and which would therefore permit lay-offs under s. 29.

It should be noted that in the Transport Guilbault case there was no obligation resting upon the employer in the event of contracting out. It is this feature as much as any other which distinguishes that case from the one under consideration.

What must be remembered is that in this case the Policy imposes an obligation on the employer in the event of contracting out. This obligation was correctly articulated by the Board:

The employer had an obligation under the Policy to review and when possible terminate contracting out arrangements in order to ensure the continued employment of indeterminate employees within the Public Service. [Emphasis added.]

In my opinion the Board's finding that the employer failed to carry out this obligation in the instant case can certainly not be characterized as patently unreasonable.

As stated by Mahoney J.A., at pp. 442-43:

The Policy does not prohibit contracting out but it does contemplate that, to facilitate redeployment of "affected", "surplus" or "laid-off" personnel, the employer will, inter alia, review and terminate its use of contracted services. That requirement is utterly inconsistent with an intention to permit the creation of "affected", "surplus" or "laid‑off" personnel by contracting out the very jobs that they have been doing. By definition, a "Work Force Adjustment" occurs when management decides that one or more indeterminate employees will no longer be required because of "lack of work" or "a discontinuance of a function". It cannot, in my view, be said that the services of an employee whose job has been contracted out are not required because of lack of work or the discontinuance of a function. That employee is not required only because the job has been contracted out. The work remains to be done and the function continues. The Vice-Chairman did not err in his determination that the employer's conduct was contrary to both the letter and spirit of the Work Force Adjustment Policy. [Emphasis added.]

Rather than attempting to safeguard jobs of indeterminate employees, the employer set out to reduce the number of such employees by contracting out the identical tasks which they were employed to do. This was contrary to the obligation set out in the Policy.

The Board's interpretation is amply supported by the evidence. The conclusion reached by the Board is one that the language it was interpreting would reasonably bear. The decision of the Board, a specialized tribunal with broad powers protected by a privative clause, in interpreting the legislation was clearly not patently unreasonable. The Court should not interfere in its decision.

Disposition

In the result, the appeal is dismissed and the order of the Board confirmed.

//L'Heureux-Dubé J.//

The reasons of L'Heureux-Dubé, Gonthier and McLachlin JJ. were delivered by

L'Heureux-Dubé J. -- I have read the reasons of my colleague Justice Cory, and agree with him that the Public Service Staff Relations Board ("the Board") did not make a patently unreasonable decision in finding that the appellant contravened the terms of its collective agreement with the respondent. However, I differ from him regarding the standard to apply to the question of whether or not the Board had the jurisdiction to determine the reference submitted to it by the respondent.

Section 99 of the Public Service Staff Relations Act, R.S.C., 1985, c. P-35, allows an employer or bargaining agent to refer a matter to the Board where the obligation at issue is not one which could be enforced through an employee grievance. If the obligation could be enforced through an employee grievance, the matter can appropriately be brought under s. 92. If the obligation is owed to the bargaining unit as a whole, a s. 99 reference is appropriate. In either event, the Board must necessarily determine to whom the obligation is owed. The question before the Court is this: To what standard will the Board be held in making this decision? Is this a matter on which the Board must be correct, or is it a matter within the jurisdiction of the Board, and to which the patently unreasonable standard will apply?

To answer this question, I adopt the pragmatic and functional approach discussed in my reasons in Canada (Attorney General) v. Mossop, [1993] 1 S.C.R. 554. Using that approach, first articulated by Beetz J. in U.E.S., Local 298 v. Bibeault, [1988] 2 S.C.R. 1048, at p. 1088:

. . . the Court examines not only the wording of the enactment conferring jurisdiction on the administrative tribunal, but the purpose of the statute creating the tribunal, the reason for its existence, the area of expertise of its members and the nature of the problem before the tribunal.

I first turn to the wording of s. 99, reproduced here for convenience:

99. (1) Where the employer and a bargaining agent have executed a collective agreement or are bound by an arbitral award and the employer or the bargaining agent seeks to enforce an obligation that is alleged to arise out of the agreement or award, and the obligation, if any, is not one the enforcement of which may be the subject of a grievance of an employee in the bargaining unit to which the agreement or award applies, either the employer or the bargaining agent may, in the prescribed manner, refer the matter to the Board.

(2) Where a matter is referred to the Board pursuant to subsection (1), the Board shall hear and determine whether there is an obligation as alleged and whether, if there is, there has been a failure to observe or to carry out the obligation.

Section 99(2) gives the Board the jurisdiction to determine whether there is an obligation "as alleged" in s. 99(1). Unfortunately, the language of s. 99(1) is capable of bearing two very different interpretations. On one reading, the issue of whether or not the obligation could be enforced through an employee grievance remains outside the Board's jurisdiction. It is, so to speak, a preliminary question on which the Board must be correct. Taking this interpretation, the Board would have the jurisdiction to determine whether or not an obligation existed, but not to determine "to whom" that obligation was owed.

However, it is also possible to interpret s. 99(1) as giving the Board the jurisdiction to determine not only whether or not there is an obligation arising out of a collective agreement, but also whether or not it is an obligation which could be enforced through an employee grievance. On this second interpretation, the question of "to whom" the obligation was owed would be within the jurisdiction of the Board, and the patently unreasonable test would apply to the Board's determination.

In my view, s. 99 is capable of bearing both interpretations, and the section thus does not provide a definitive answer to the question posed by Beetz J. in Bibeault, supra, at p. 1087: "Did the legislator intend the question to be within the jurisdiction conferred on the tribunal?" To determine which of these two interpretations is more appropriate, the Court must consider the other factors that inform the pragmatic approach.

I agree with the comments of my colleague concerning the Board's empowering legislation, and its broad and extensive powers. By according the Board's decisions the protection of a broadly worded privative clause, Parliament made express its intention that these decisions be accorded a great deal of deference. The expertise of the Board and its members further supports the proposition that the grant of jurisdiction in s. 99 was intended to be broad rather than more narrow.

The expertise of the Board is particularly important in light of the nature of the question to be answered. The question of "to whom" an obligation is owed cannot be meaningfully separated from the question of whether or not the obligation itself exists. It is clear that the Board has the expertise and jurisdiction to determine whether or not the obligation exists. In my opinion, the very skills that enable the Board to make this determination are the same skills that would assist them in determining to whom the obligation was owed. This seems to be a question which lies at the centre of their specialized expertise.

In my view, when all these factors are considered, the question of whether or not a matter is properly brought under s. 99 is one which is within the jurisdiction of the Board, and the Court should defer to the Board's decision to the extent that it is not patently unreasonable. In the case before the Court, I find that the Board was not patently unreasonable in concluding that the obligation was the type which could properly form the basis of a s. 99 reference.

Though I differ from Cory J. with respect to the appropriate standard on the issue of the jurisdiction to determine the reference, I am in complete agreement with his disposition of the case, and would, as does he, dismiss the appeal and restore the order of the Board.

Appeal dismissed.

Solicitor for the appellant: John C. Tait, Ottawa.

Solicitors for the respondent: Raven, Jewitt & Allen, Ottawa.