Dayco (Canada) Ltd. v. CAW‑Canada, [1993] 2 S.C.R. 230
Dayco (Canada) Ltd. Appellant
v.
National Automobile, Aerospace and Agricultural
Implement Workers Union of Canada (CAW‑Canada)
(formerly International Union, United Automobile,
Aerospace and Agricultural Implement Workers of
America (UAW)) and Howard D. Brown, Arbitrator Respondents
Indexed as: Dayco (Canada) Ltd. v. CAW-Canada
File No.: 22180.
1992: May 7; 1993: May 6.
Present: Lamer C.J. and La Forest, Sopinka, Gonthier, Cory, McLachlin and Iacobucci JJ.
on appeal from the court of appeal for ontario
Labour relations -- Grievance arbitration -- Company ending retired workers' benefits derived from expired collective agreement -- Union initiating grievance -- Whether or not grievance arbitrable -- Whether or not arbitrator correctly assumed jurisdiction.
Judicial review -- Labour Relations Board -- Grievance arbitration -- Company ending retired workers' benefits derived from expired collective agreement -- Union initiating grievance -- Whether or not grievance arbitrable -- Whether or not arbitrator correctly assumed jurisdiction -- Whether or not privative clause applicable -- Labour Relations Act, R.S.O. 1980, c. 228, s. 44.
Appellant shut down its Hamilton plant in 1983 and permanently closed it in 1985. The company provided certain group insurance benefits to its employees under former collective agreements, the last one of which was signed on April 27, 1983 and expired on April 21, 1985. Prior to the final closing, the company and the union negotiated a shutdown agreement, under which the group insurance benefits for active employees would be discontinued six months after the plant closed. The agreement did not mention the retirees' benefits. The collective agreement was formally terminated on May 29, 1985. The pension plan was wound up and an annuity was bought to satisfy the company's outstanding pension obligations.
The company advised all retirees that their benefits would be terminated when the benefits for active employees were to cease under the shutdown agreement. The union lodged a grievance on behalf of the retired workers, demanding reinstatement of the benefits. The company refused to acknowledge this grievance and objected to the arbitrator's jurisdiction. In its opinion, there was no collective agreement in place when the grievance was lodged and it had no obligations to the retired workers on any basis but the collective agreement.
At the arbitration hearing the company renewed its objection to the grievance, and argued that the arbitrator had no jurisdiction because the collective agreement had ended. The arbitrator heard submissions on this point only, and then adjourned the hearing. In a written award, he rejected the company's arguments on jurisdiction, found that the matter before him was arbitrable, and ordered the arbitration to proceed on the merits at a later date. The company applied for judicial review of the arbitrator's decision, and the Divisional Court set aside the award. An appeal to the Court of Appeal was allowed, thus reinstating the arbitrator's award. This appeal raises two issues. The first is the scope of judicial review of the arbitrator's decision. The remaining issue is the correctness of the arbitrator's finding that a promise to pay benefits to retired employees can survive the expiration of the collective agreement in which the promise is made.
The union sought to cross‑appeal that portion of the Court of Appeal's order directing that the arbitration proceed before a different arbitrator. That order was made at the request of the company, in the belief that the arbitrator had in effect pre‑judged the merits of the case in the course of determining his jurisdiction.
Held: The appeal and cross‑appeal should be dismissed.
Per La Forest, Sopinka, Gonthier, McLachlin and Iacobucci JJ.: At this Court, the appellant only challenged the conclusion of the arbitrator on the general proposition that a promise in a collective agreement can survive the expiry of the collective agreement in which the promise is made. In answering the question the arbitrator was not acting within his jurisdiction in a strict sense. Rather he was deciding upon jurisdiction and as such was required to be correct.
Courts should, as a matter of policy, defer to the expertise of the arbitrator in questions relating to the interpretation of collective agreements. An arbitrator has jurisdiction stricto sensu to interpret the provisions of a collective agreement in the course of determining the arbitrability ‑‑ i.e., the arbitrator's jurisdiction ‑‑ of matters under that agreement. But here the viability and subsistence of the collective agreement is challenged. The collective agreement is the foundation of the arbitrator's jurisdiction, and in determining that it exists or subsists, the arbitrator must be correct. If the issue is arbitrable, then the arbitrator has jurisdiction, at least in the limited sense of being empowered to decide that question. The more difficult problem is whether the arbitrator, in making that inquiry, has the right to be wrong. This requires a pragmatic and functional analysis of the appropriate standard of review.
The wording of the precise grant of power in s. 44 of the Labour Relations Act is not determinative of the scope of an arbitrator's jurisdiction. In viewing the text of s. 44(2) as a whole, the power to determine arbitrability will for many "matters" connote a grant of jurisdiction stricto sensu. When the "matter" must be measured against the collective agreement to determine if it is arbitrable, the arbitrator will have the right to be wrong. This takes account of the entire purpose of the provision, which is to empower the arbitrator to deal with differences between the parties relating to the agreement. Moreover, this is in accord with the arbitrator's core area of expertise. But when there is a dispute over whether the grievance pertains to some other agreement or no agreement at all, then the board must determine its jurisdiction, and it must be correct in so doing.
The conclusions that emerge from the wording of the statute are confirmed by considering the role of the arbitrator within the arbitration scheme established by the Act. The phrase "final and binding upon the parties" in s. 44 has a limited privative effect on the issue in this appeal. Section 44 should be contrasted with the strong and explicit privative clause in s. 108 protecting decisions of the Labour Relations Board. If the legislature had intended to mandate the same judicial deference to an arbitrator as to the board, it could simply have brought the arbitrator under the shelter of s. 108.
A consideration of the purpose of arbitration and the expertise of arbitrators indicates that an arbitration board falls towards the lower end of the spectrum of those administrative tribunals charged with policy deliberations to which the courts should defer. Tribunals vested with the responsibility to oversee and develop a statutory regime are more likely to be entitled to judicial deference. The Labour Relations Act clearly assigns a general supervisory role to the Ontario Labour Relations Board. In contrast, the arbitrator's role is confined to the resolution of grievances under a collective agreement. The relative expertise of board members and arbitrators must be presumed to be commensurate with the scope of these divergent statutory mandates.
The extent to which the present case turns on questions falling within that area of expertise must be considered. Here, the question to be decided requires consideration of concepts that are analogous to certain common law notions ‑‑ "vesting" and accrued contractual rights ‑‑ that fall outside the tribunal's sphere of exclusive expertise. Arbitrators can apply common law concepts but in these matters the arbitrator has no exclusive or unique claim to expertise.
The functional analysis of the jurisdiction of the arbitrator in this case indicates that in deciding whether a collective agreement continues to determine the rights and obligations between the parties, the arbitrator is required to be correct.
With respect to the substantive issue in this appeal, the arbitrator correctly found, as a general proposition, that it is possible for a promise of retirement benefits to survive the expiry of the collective agreement in which it is found. Guidance can be found by reference to certain analogous (and perhaps binding) concepts in the common law of contracts such as the common law notion of termination of a contract. A collective agreement is rather like a contract for a fixed term which expires by mutual agreement at the end of the term. It ceases to have prospective application, but the rights that have accrued under it continue to subsist.
Rights that have accrued under a collective agreement can remain enforceable. The new agreement "displaces" the old one, which is no longer in force. But this is with respect to the current employment relationship, and says nothing about the previously accrued rights of the parties. Nothing differentiates the promise to pay retirement health benefits from promises to pay regular wages or vacation pay. All of these can be enforced after the termination of the agreement.
The first step in analyzing the arbitrability of an expired collective agreement is to determine the general question of whether expiry forecloses the ability of parties to grieve matters that arose during the currency of the agreement. The proper focus is to examine when the rights being grieved had accrued, not the time of breach. The term "vested" must be taken to mean only that vested rights are not automatically extinguished by the expiry of the collective agreement. Vesting in this context says nothing of the ultimate indefeasibility or inviolability of the rights. This "weak form" of vesting is sufficient to determine the result in this case. Since the retirement benefits here were not withdrawn by any subsequent agreement between the parties, there was no opportunity for the retroactive extinguishment of the rights which accrued under the expired agreement. The second phase of the arbitrator's analysis was really just an application of the general principle to the specific case of retirees' benefits.
American and Canadian jurisprudence indicates that retirement benefits are in the nature of accrued rights and those may (depending on the terms of the agreement) vest. The time of retirement is the time when certain rights granted under a collective agreement vest. The vested rights can be enforced by union grievance on behalf of retirees.
Retired workers fall outside the bargaining unit and are thereby excluded from the collective bargaining process. Statutory vesting protections have been extended to pension plans, but not welfare plans. The question of vested welfare benefits is to be determined by the contracting parties. While the retirees are outside the collective bargaining process, unions can (and frequently do) bargain on behalf of retired workers. But this does not affect the status of vesting. The American notion of retirement benefits as a permissive subject of bargaining, which either party to the negotiations can refuse to discuss, is largely irrelevant to the status of vesting of retirees' benefits. Vesting is determined by the contractual agreement between the parties, not the subsequent bargaining between them. In practical terms, vested rights are protected by the right to grieve the expired collective agreement, not by control over the subsequent bargaining process. An intention to vest benefits can be inferred as the retirees would not have wanted their benefits to depend upon the goodwill of the parties during future collective bargaining. This inference, as one measure of the context in which bargaining took place between the parties, is a useful tool that can be employed by arbitrators in Canada on a case‑by‑case basis.
The range of remedial choices available to individual retired workers may be the one area where there may be a crucial difference in the nature (but not the existence) of vested retirement benefits in Ontario as compared to the United States. Canadian retirees may find themselves in possession of a right without a remedy. The grievance procedure may be foreclosed because retirees may not be entitled to bring a claim against the union for unfair representation, as such rights in Ontario appear to be limited to current members of the bargaining unit. Ontario's Rights of Labour Act may foreclose the possibility of a court action by the retirees. There may be means for retirees to surmount these remedial roadblocks, but these need not be determined here because the union has brought the grievance for the retirees. The arbitrator was correct that retirement rights can, if contemplated by the term of the collective agreement, survive the expiration of that agreement, and that such rights vest at the time of retirement. The arbitrator should proceed to determine whether the terms of the specific agreement create such a vested right.
The cross‑appeal was not argued during oral submissions to this Court and, in the absence of an order granting leave to cross‑appeal, the issue was not properly before the Court. The cross‑appeal could not therefore be considered.
Per Cory J.: The three basic grounds for judicial review provide protection for the parties from decisions made without jurisdiction, from patently unreasonable decisions and from failure to provide procedural fairness. As a general rule, they allow the whole system for the resolution of labour disputes to function expeditiously, simply and as inexpensively as possible.
The arbitrator here had to be correct in his decision as to whether or not he had jurisdiction to resolve the question before him and the court had to intervene if he erred in this respect. It was not necessary to consider the standard of review by the courts of an arbitrator's decision on the merits because this case turned on the jurisdictional issue. Given jurisdiction, a court can only intervene if the decision reached was patently unreasonable. This deference has also been accorded to arbitrators acting in the same field. Decisions whether made by tribunals, boards or arbitrators, should be final and binding unless patently unreasonable. No distinction as to the deference given should be drawn between "final and conclusive" and "final and binding". Litigation as to whether a privative clause is more privative or less privative should not be encouraged. The rules as to court review should remain simple, straightforward and easy to follow.
Per Lamer C.J.: The reasons of La Forest J. were agreed with, except as regards the effect of "quasi-privative clauses"; the reasons of Cory J. were agreed with in that regard.
Cases Cited
By La Forest J.
Applied: Bradburn v. Wentworth Arms Hotel Ltd., [1979] 1 S.C.R. 846, reversing (1976) 13 O.R. (2d) 56; considered: U.E.S., Local 298 v. Bibeault, [1988] 2 S.C.R. 1048; Canadian Union of Public Employees, Local 963 v. New Brunswick Liquor Corp., [1979] 2 S.C.R. 227; National Corn Growers Assn. v. Canada (Import Tribunal), [1990] 2 S.C.R. 1324; Re Goodyear Canada Inc. and United Rubber Workers, Local 232 (1980), 28 L.A.C. (2d) 196; Metropolitan Toronto (Municipality) v. C.U.P.E., Loc. 43 (1990), 69 D.L.R. (4th) 268; Genstar Chemical Ltd. v. I.C.W.U., Local 721, [1978] O.L.R.B. Rep. 835; Re Red River Division Association and Red River School Division No. 17 (1972), 25 D.L.R. (3d) 106; John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543 (1964); U.A.W. v. Yard‑Man, Inc., 716 F.2d 1476 (1983), certiorari denied, 465 U.S. 1007 (1984); Canadian Paperworkers Union v. Pulp and Paper Industrial Relations Bureau (1977), 77 C.L.L.C. 675; distinguished: Hémond v. Coopérative fédérée du Québec, [1989] 2 S.C.R. 962; referred to: Volvo Canada Ltd. v. U.A.W., Local 720, [1980] 1 S.C.R. 178; Douglas Aircraft Co. of Canada v. McConnell, [1980] 1 S.C.R. 245; Re Bricklayers' & Masons' Union, Local 1, and Wilchar Construction Ltd. (1962), 12 L.A.C. 347; Re Fortune Footwear and United Textile Workers of Amercia, Local 369 (1980), 25 L.A.C. (2d) 350; Re Carpenters' District Council of Toronto and Vicinity and Engineering Structures and Components (1978), 19 O.R. (2d) 445; Re Bell Canada and Communication Workers of Canada (1980), 27 L.A.C. (2d) 163; CAIMAW v. Paccar of Canada Ltd., [1989] 2 S.C.R. 983; Canada (Attorney General) v. Public Service Alliance Canada, [1991] 1 S.C.R. 614; 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; Re De Havilland Aircraft and United Automobile Workers (1976), 13 L.A.C. (2d) 401; Canada (Attorney General) v. Mossop, [1993] 1 S.C.R. 554; McGavin Toastmaster Ltd. v. Ainscough, [1976] 1 S.C.R. 718; In re De Havilland Aircraft of Canada Ltd. and U.A.W., Local 112 (1950), 2 L.A.C. 465; Re United Steelworkers, Local 5951 and Medland Enterprises Ltd. (1963), 14 L.A.C. 55; Re International Chemical Workers, Local 564 and Cyanamid of Canada Ltd. (1969), 20 L.A.C. 111; Re Ontario Public Service Employees Union and The Queen in right of Ontario (1985), 51 O.R. (2d) 474; Re Communications Union Canada and Bell Canada (1979), 23 O.R. (2d) 701; Hamilton Civic Hospitals v. Canadian Union of Public Employees, Local 794, [1983] O.L.R.B. Rep. 371; NOA v. Burns Meats Ltd. (1986), 74 A.R. 352; Chemical and Alkali Workers v. Pittsburgh Plate Glass Co., 404 U.S. 157 (1971); United Food and Commercial Workers Int'l Union v. Dubuque Packing Co., 756 F.2d 66 (1985); Anderson v. Alpha Portland Industries, Inc. 836 F.2d 1512 (1988), certiorari denied 489 U.S. 1051 (1989); Anderson v. Alpha Portland Industries, 727 F.2d 177 (1984), rehearing en banc 752 F.2d 1293 (1988), certiorari denied, 471 U.S. 1102 (1985); Schneider Moving & Storage Co. v. Robbins, 466 U.S. 364 (1984); St. Anne Nackawic Pulp & Paper Co. v. Canadian Paper Workers Union, Local 219, [1986] 1 S.C.R 704, affirming (1982), 142 D.L.R. (3d) 678; Turner v. Teamsters, 604 F.2d 1219 (1979); Bower v. Bunker Hill Co., 725 F.2d 1221 (1984); U.A.W. v. Cadillac Malleable Iron Co., 728 F.2d 807 (1984); United Paperworkers v. Champion International Corp., 908 F.2d 1252 (1990); Keffer v. H. K. Porter Co., 872 F.2d 60 (1989); United Steelworkers of America v. Connors Steel Co., 855 F.2d 1499 (1988); Ryan v. Chromalloy American Corp., 877 F.2d 598 (1989); Merk v. Jewel Companies, Inc., 848 F.2d 761 (1988); Cominco Pensioners Union and Cominco Ltd., [1979] 2 Can. L.R.B.R. 322; Re Coulter Manufacturing Ltd. (1972), 1 L.A.C. (2d) 426; Century Brass Products, Inc. v. U.A.W., 795 F.2d 265 (1986); Philip Carey Mfg. Co. v. N.L.R.B., 331 F.2d 720 (1964), certiorari denied, 379 U.S. 888 (1964).
By Cory J.
Referred to: U.E.S., Local 298 v. Bibeault, [1988] 2 S.C.R. 1048; Canadian Union of Public Employees v. New Brunswick Liquor Corp., [1979] 2 S.C.R. 227; Volvo Canada Ltd. v. U.A.W., Local 720, [1980] 1 S.C.R. 178; Fraternité des policiers de la Communauté urbaine de Montréal Inc. v. Communauté urbaine de Montréal, [1985] 2 S.C.R. 74; Heustis v. New Brunswick Electric Power Commission, [1979] 2 S.C.R. 768.
Statutes and Regulations Cited
Employee Retirement Income Security Act, 29 U.S.C. §§ 1001, 1051, 1053.
Labor Management Relations Act, 29 U.S.C. §§ 185(a), 301.
Labour Code, S.B.C. 1973 (2nd), c. 122.
Labour Relations Act, R.S.O. 1980, c. 228, ss. 44, 103, 107, 108.
National Labor Relations Act, 29 U.S.C. § 159(a).
Pension Benefits Act, R.S.O. 1990, c. P‑8, ss. 10, 35‑38, 75.
Rights of Labour Act, R.S.O. 1980, c. 456, s. 3(3).
Rules of the Supreme Court of Canada, SOR/83-74, s. 29(2), as am. by SOR/88-247.
Authors Cited
Adams, George W. Canadian Labour Law, 2nd ed. Aurora, Ont.: Canada Law Book, 1993.
Adell, B. L. The Legal Status of Collective Agreements in England, The United States and Canada. Kingston, Ont.: Queen's University Industrial Relations Centre, 1970.
Anson, William R. Anson's Law of Contract, 26th ed. By A. G. Guest. Oxford: Clarendon Press, 1984.
Atiyah, P. S. An Introduction to the Law of Contract, 4th ed. Oxford: Clarendon Press, 1989.
Brown, Donald J. M., Q.C., and David M. Beatty. Canadian Labour Arbitration, 3rd ed. Aurora, Ont.: Canada Law Book, 1992.
Palmer, Earl Edward and Bruce Murdoch Palmer. Collective Agreement Arbitration in Canada, 3rd ed. Toronto: Butterworths, 1991.
APPEAL and CROSS‑APPEAL from a judgment of the Ontario Court of Appeal allowing an appeal (with the direction that the matter be continued before another arbitrator) (1990), 74 O.R. (2d) 648, 40 O.A.C. 219, 73 D.L.R. (4th) 718, 90 C.L.L.C. {PP} 14,040, 47 Admin. L.R. 1, from a judgment of the Divisional Court (1987), 61 O.R. (2d) 207, 42 D.L.R. (4th) 456, quashing an arbitrator's award. Appeal and cross‑appeal dismissed.
H. Lorne Morphy, Q.C., Geoffrey D. Creighton and Mark E. Geiger, for the appellant and H. Lorne Morphy, Q.C., in response on the cross-appeal.
Lennox A. MacLean, Q.C., for the respondents and G. James Fyshe on the cross‑appeal.
//Lamer C.J.//
The following are the reasons delivered by
Lamer C.J. -- I concur in the reasons of Justice La Forest, except as regards the effect of what some have coined as being "quasi-privative clauses", as a result of language such as "final and conclusive" or "final and binding" when referring to the tribunals' decisions, where I agree with Justice Cory.
//La Forest J.//
The judgment of La Forest, Sopinka, Gonthier, McLachlin and Iacobucci JJ. was delivered by
La Forest J. -- This appeal considers whether a labour arbitrator has jurisdiction to hear a grievance over benefits for retired workers despite the expiry of the collective agreement by which those benefits were created. The substantive issue to be determined is the status of retirement benefits upon the expiration of a collective agreement. A second issue is the scope of judicial review of the arbitrator's finding that he had jurisdiction pursuant to s. 44 of Ontario's Labour Relations Act, R.S.O. 1980, c. 228.
Background
The appellant, Dayco (Canada) Ltd., operated a factory in Hamilton. In 1985 it transferred its operations to Mexico, and the Hamilton plant was closed. The work force at the plant had been represented by the respondent union since 1965, when the first of a series of biennial collective agreements had been signed. The last of these agreements was signed on April 27, 1983 and expired on April 21, 1985. Under this and previous agreements, the company provided certain group insurance benefits to its employees. The relevant provision of the last agreement is article 60:
60. GROUP INSURANCE
Subject to the provisions hereof, the Company agrees to make available to employees who have personally worked at least thirty (30) days for the Company and who are actually on active payroll of the Company, but only while such employees are not on strike, lay-off, sick leave or other leave of absence, a so-called "Group Insurance Plan" to be financed by the Company . . . . Such Group Insurance Plan shall incorporate substantially the following schedule of benefits for the participating employees only;
[A list of eight benefits follows, two of which are life insurance and accidental death and dismemberment insurance. The list takes the form of subsections (i) to (viii). They are followed by subsection (ix) in the following form:]
(ix)The Company agrees to provide all retirees with a paid-up $2,500.00 Life and Accidental Death and Dismemberment policy, and other benefits negotiated, unless coverage is provided by the Government.
By virtue of Article 60(ix), retired workers received not only the insurance policy explicitly mentioned, but also four of the other group insurance benefits provided to current employees: O.H.I.P., semi-private hospital coverage, extended health care, and dental insurance. The company also established, in a separate document, a pension plan for retirees. This plan was incorporated by reference into the collective agreement.
In October 1983 the Hamilton factory was shut down, and was permanently closed in January 1985. Prior to the final closing, the company and the union negotiated a shutdown agreement, under which the group insurance benefits for active employees would be discontinued six months after the plant closed. However, the agreement did not mention the retirees' benefits. The collective agreement was formally terminated on May 29, 1985, after compliance with the procedures prescribed by the Labour Relations Act ("the Act"). At the same time the pension plan was wound up, and an annuity was purchased to satisfy the company's outstanding pension obligations.
Two days later, the company advised all retirees that their benefits under Article 60(ix) would be terminated as of June 30, 1985, the same day the benefits for active employees were to cease under the shutdown agreement. The union lodged a grievance on behalf of the retired workers, demanding reinstatement of the benefits. The company refused to acknowledge this grievance, because "there was no collective agreement in place at the time the said grievance was lodged, and the Company has no obligations to these retirees on any other basis." Despite this position, the company did subsequently provide the $2500 policy explicitly referred to in Article 60(ix). In the result, only the "other benefits negotiated" under Article 60(ix) remained in dispute.
The union took the grievance to arbitration, as contemplated by articles 20 and 21 of the collective agreement, which read:
20. ARBITRATION
Each employee grievance which is not settled by the grievance procedure shall, at the request of either the Company or the Union . . . be submitted for arbitration to an arbitrator to be selected as hereinafter provided. . . . The decision of the arbitrator shall be final and binding upon the Company, the Union and all of the employees. . . .
21. Anything to the contrary contained herein, notwithstanding, the arbitrator shall have no power to add to, subtract from or modify any of the terms, conditions or provisions of this agreement or any agreement made supplementary thereto.
This arbitration process is mandated by s. 44 of the Act. It reads:
44.--(1) Every collective agreement shall provide for the final and binding settlement by arbitration, without stoppage of work, of all differences between the parties arising from the interpretation, application, administration or alleged violation of the agreement, including any question as to whether a matter is arbitrable.
(2) If the collective agreement does not contain such a provision as is mentioned in subsection (1), it shall be deemed to contain the following provision:
Where a difference arises between the parties relating to the interpretation, application or administration of this agreement, including any question as to whether a matter is arbitrable, or where an allegation is made that this agreement has been violated, either of the parties may, after exhausting any grievance procedure established by this agreement, notify the other party in writing of its desire to submit the difference or allegation. . . . The arbitration board shall hear and determine the difference or allegation and shall issue a decision and the decision is final and binding upon the parties. . . .
At the arbitration hearing the company renewed its objection to the grievance, and argued that the arbitrator had no jurisdiction because the collective agreement had ended. The arbitrator heard submissions on this point only, and then adjourned the hearing. In a written award, he rejected the company's arguments on jurisdiction, found that the matter before him was arbitrable, and ordered the arbitration to proceed on the merits at a later date. The company applied for judicial review of the arbitrator's decision, and the Supreme Court of Ontario (Divisional Court) set aside the award. An appeal to the Court of Appeal for Ontario was allowed, thus reinstating the arbitrator's award. Leave to appeal to this Court was granted on June 20, 1991, [1991] 1 S.C.R. viii.
Judgments
Arbitration Award (H. D. Brown)
After reviewing the facts and the submissions of the parties, the arbitrator thus summarized his view of the problem and his approach to its resolution:
The issue to be determined at this point of the dispute is whether the grievance is arbitrable. If there is an allegation of a breach of terms of a collective agreement which both parties acknowledge has expired when the grievance was filed, that fact by itself, does not preclude the matter from being heard.... That then leads to the consideration of whether there is, as argued by the Union, a vested right in the retirees for the benefits claimed under Article 60 which extends beyond the term of the collective agreement.
For the arbitrator, then, the key issue was whether some right in favour of the retirees had vested during the currency of the collective agreement. On this point, the arbitrator turned first to the terms of the collective agreement, and after a careful analysis he concluded that Article 60(ix) was intended to vest benefits with the retirees. He stated:
I find this specific provision to have been intended and drawn as such by the parties as a retirement benefit and not an employment benefit, which would be extinguished at the end of the collective agreement in the circumstances set out in Article 60. When these benefits are viewed in that manner and given the present state of negotiations for collective agreements in this province, the provision for these benefits in the same way as the provision for the pension plan could not be removed from retirees by the parties, although they might negotiate about the benefits but what was negotiated would be the result applicable to the retirees.
While the reasons of the arbitrator are not entirely clear, it would appear that he concluded that a retired worker's benefits can (depending on the terms of the collective agreement) vest indefeasibly at the time of retirement, i.e., the benefits could not be bargained away during subsequent negotiations between the company and the union, or be terminated unilaterally by the company. It should be noted that in reaching these general conclusions the arbitrator ventured well into the "merits" of the case by interpreting the terms of the agreement before him. Despite this, he expressly disclaimed any conclusion on the meaning of the agreement. He stated:
It is not necessary for the purpose of this award to determine whether the claim has merit and that where the Company denied it [sic] there was a breach of the agreement, this decision goes only to the extent of finding that such issue can be dealt with at arbitration.
The arbitrator based his conclusions, in large measure, upon a series of American cases which hold that retirement benefits can vest. He acknowledged that these American cases were based on a different statutory structure, but concluded that they were nonetheless useful for "examining industrial relations' principles and concepts." After a review of this law, he concluded as follows:
The principles referred to in these cases which are not contradicted to date by any Canadian jurisprudence, support a conclusion that benefits given to employees who retire are vested at the date of their retirement and continue for their benefit regardless of the collective bargaining relationship between the parties, therefore to extend beyond the expiry date of a collective agreement and the closure of the operations at which the retiree worked. These benefits are considered as earned benefits for service provided for the employer and are part of the retirement benefits to which the retiree is entitled. Such a conclusion is strengthened in the present case in consideration of Article 60 (ix) of the collective agreement. While the parties might negotiate changes to the other benefits referred to in that section from time to time, the right to those benefits came into effect on the retirement of the employee under the terms of the agreement then in effect and continued through to the last collective agreement between the parties and must be continued for their benefit as part of the bargain on their retirement. The collective agreement distinguishes between the benefits available to retirees and those of active employees, as set out in Article 60.
In the result, the arbitrator found the dispute arbitrable, and dismissed the company's objection to his jurisdiction.
Supreme Court of Ontario (Divisional Court) (1987), 61 O.R. (2d) 207 (J. Holland, White and Bowlby JJ.)
On the company's application for judicial review, a majority of the Divisional Court found the arbitration award should be quashed. Writing for the majority, J. Holland J. first considered the standard of review for the application, and ruled at p. 213 that "[i]n determining the threshold question of arbitrability, the Arbitrator was required to be correct." As authority for this proposition he cited the majority judgment of this Court in Bradburn v. Wentworth Arms Hotel Ltd., [1979] 1 S.C.R. 846. Applying this standard, J. Holland J. concluded as follows at p. 217:
The Arbitrator erred in law and jurisdiction when he found that the alleged breach of the retirees' benefits arose "if at all" during the currency of the last collective agreement between the parties and, as well, when he found that the collective agreement contemplated benefits to be available beyond the terms of that agreement. [Emphasis in original.]
J. Holland J. distinguished the American case law supporting the arbitration award on the ground that it rested on a concept of vested rights unknown to Canadian labour law. In his view, the company's termination of the retirees' benefits was an incident that arose after the expiry of the collective agreement, thereby foreclosing the arbitrator's jurisdiction.
In dissent, White J. was of the opinion that the award was rendered within the arbitrator's jurisdiction, and hence should only be reviewed to a standard of patent unreasonability. White J. found support for this view in the terms of the collective agreement and prevailing statutes, and in the minority judgment of Laskin C.J. in Bradburn, supra. Applying this standard, White J. concluded that the arbitrator's decision was not patently unreasonable. He found that Canadian case law supported an arbitrator's right to hear a grievance over accrued rights despite the expiry of the underlying collective agreement. His reasoning is encapsulated in the following passage at p. 230:
There does not seem to be any escape from the likelihood that, unless the Company had promised to provide [the employees] with such retirement benefits, the rate of pay bargained for, while they were active members of the Union in the collective agreements, would have been higher. A promise to provide for an employee in his retirement years is a promise which, of its very nature, anticipates that he will enjoy the benefit of the promise when he no longer belongs to the Union. It is also a promise which, of its very nature, is not dependent upon the Union (which negotiated that benefit for the employee) and the Company (which promised that benefit) necessarily being in a continuing collective bargaining relationship. The promise of the Company, as expressed in art. 60(ix) of the last agreement and in predecessor agreements is not subject to the express condition subsequent that it shall no longer be effective if there is no longer extant a collective bargaining agreement between the Union and the Company.
Consequently, White J. would have dismissed the application for judicial
review.
Ontario Court of Appeal (1990), 74 O.R. (2d) 648 (Blair and Catzman JJ.A. and Craig J. (ad hoc))
The Court of Appeal overturned the decision of the Divisional Court, and reinstated the arbitration award. Blair J.A., writing for a unanimous court, identified three issues: the possible existence and effect of a privative clause, whether the arbitrator was acting within his jurisdiction, and whether the arbitrator's decision was patently unreasonable.
On the first issue, Blair J.A. found that the arbitrator's award was shielded from judicial review by s. 44(1) of the Act, because the phrase "final and binding" upon the parties found therein is a form of privative clause. As authority for this proposition he relied on Metropolitan Toronto (Municipality) v. C.U.P.E., Loc. 43 (1990), 69 D.L.R. (4th) 268 (Ont. C.A.), and he declined to follow the apparently contradictory decision of this Court in Bradburn, supra. In consequence, so long as the arbitrator was acting within his jurisdiction, the standard of review of his award would be patent unreasonability. The question of jurisdiction was, of course, the second issue identified by Blair J.A.
After considering the law on judicial review emanating from this Court, and in particular the "functional and pragmatic approach" established in U.E.S., Local 298 v. Bibeault, [1988] 2 S.C.R. 1048, Blair J.A. determined that the arbitrator in the present case had acted within his jurisdiction. He reasoned as follows at p. 660:
The question before the arbitrator in this case was, in the language of s. 44(1) of the Act, a difference "between the parties arising from the interpretation, application . . . or alleged violation of the (collective) agreement". The arbitrator was explicitly given jurisdiction by s. 44(1) to determine whether the question was arbitrable. The legislative purpose for giving the arbitrator this power is obvious. In order to achieve industrial peace, the legislature has established a special regime for dealing with labour disputes by a specialized tribunal and arbitrators. The legislature relies on this expertise to decide expeditiously questions of law and fact within the limits of their jurisdiction and in the best interests of the parties and the public.
In this case, there can be no doubt that the arbitrator had jurisdiction to decide whether the grievance was arbitrable because he is specifically empowered to do so by s. 44(1) of the Act. In addition the legislative purpose for providing for prompt and fair settlement of labour disputes is manifest and must be respected....
In the result, the standard of review employed by the Court of Appeal was that of patent unreasonability. On that point, Blair J.A. reviewed with approval the case law relied upon by the arbitrator, and in particular he endorsed the arbitrator's reliance upon American case law. He rejected the approach of J. Holland J., which focused on whether the alleged breach of the collective agreement occurred during the currency of the agreement, finding instead that the relevant issue was whether an obligation had accrued that could survive the termination of the agreement. In the end, Blair J.A. found that the arbitrator's decision was not patently unreasonable. He stated at p. 664:
The arbitrator was not required to decide at the preliminary stage of his inquiry whether the right of retirees to benefits survived the termination of the collective agreement. His task was simply to determine whether the survival of retiree benefits was an arbitrable question. He concluded that it was. In light of the considerations outlined above, the arbitrator's decision that he had jurisdiction to arbitrate the union's grievance in this case was not patently unreasonable.
Accordingly, the Court of Appeal ordered the matter to be remitted back to arbitration to proceed with the merits of the case.
With respect to that order, the company argued that a different arbitrator should be assigned to decide the merits, as the current arbitrator had effectively pre-judged that question in the course of deciding the jurisdictional issue. Blair J.A. accepted this argument with reluctance, stating at p. 665:
While I see little merit in the company's objection, I recognize that the arbitrator, in deciding the dispute was arbitrable, had to satisfy himself that it was arguable that the parties intended benefits to survive the termination of the agreement. Accordingly, without in any way reflecting on the integrity of the arbitrator and for the purpose only of removing a ground for objection to the disposition of the second part of the arbitration, I would direct that the arbitration be continued by another arbitrator.
The union disputes the propriety of this direction, and cross-appealed to this Court on that issue.
Analysis
This appeal raises two issues. The first is the scope of judicial review of the arbitrator's decision, a point on which the various judgments in the courts below have differed. The Court of Appeal concluded that because of a privative clause there was only a narrow scope for review. In my view considerations of privity are premature in this case, as the real question is whether the arbitrator was acting within his jurisdiction. On this point, I must respectfully differ from the conclusion of Blair J.A. in the court below. In my view the arbitrator was not acting within his jurisdiction stricto sensu. Rather he was deciding upon jurisdiction. As such, he was required to be correct.
The remaining issue, then, is the correctness of the arbitrator's finding. Keeping in mind the limited scope of the company's attack of that award (about which I shall have more to say later), I have concluded that the arbitrator was correct in adopting the general proposition that a promise to pay benefits to retired employees can, depending on the wording of that promise, survive the expiration of the collective agreement in which the promise is made. In the result, I would dismiss this appeal and uphold the arbitration award.
1. The Scope of Judicial Review
At the outset it is important to understand exactly what the arbitrator decided in this case, and the scope of the issue brought before this Court. When the union's grievance was submitted to arbitration, the company objected because "there was no collective agreement in place at the time the said grievance was lodged, and the Company has no obligations to these retirees on any other basis." Conceivably, this objection could encompass a jurisdictional challenge on two levels. First, the company could (and did) advance the general proposition that a promise in a collective agreement to pay retirement benefits, no matter how strongly worded, cannot survive the expiration of that agreement. However, the company could also argue the narrower point that the specific terms of the agreement under grievance did not provide for vesting of retirement benefits. Unfortunately, it is not entirely clear from the arbitrator's ruling whether the company pursued its case on both these levels, although it seems that the hearing was focused on the former question. It may be, however, that submissions were made on the narrower question, which would explain the arbitrator's digression into the specifics of the agreement before him.
In any event, the case comes to this Court only on the first issue outlined above. Leave to appeal was sought only on the question of the survivability of retirement benefits in general, and counsel for the company confined his submissions to that issue. The Court was not asked to review the arbitrator's interpretation of the agreement at hand. Had that issue properly been before this Court, I have no doubt that the scope of our review of that aspect of the arbitration award would have been a narrow one -- we would have embarked on a patent unreasonability enquiry. However, on the more general level at which the jurisdictional debate was engaged in this Court, I am of the view that the appropriate scrutiny of the arbitrator's decision is to a standard of correctness. My reasons for this position are set out below, but at this juncture I should perhaps comment on this stratified approach to the issues arising from the arbitrator's award.
To begin, I would not wish my conclusions on the standard of review in this case to be taken as a retreat from the deferential approach to judicial review of administrative tribunals since the decision of this Court in Canadian Union of Public Employees, Local 963 v. New Brunswick Liquor Corp., [1979] 2 S.C.R. 227. Nor are the conclusions here inconsistent with the previous statements by this Court as to the appropriate scope of judicial review of arbitration awards made pursuant to s. 44 of the Act. This Court has stated in previous cases that courts should, as a matter of policy, defer to the expertise of the arbitrator in questions relating to the interpretation of collective agreements; see Volvo Canada Ltd. v. U.A.W., Local 720, [1980] 1 S.C.R. 178 and Douglas Aircraft Co. of Canada v. McConnell, [1980] 1 S.C.R. 245. This development is traced in the dissenting reasons of Wilson J. in National Corn Growers Assn. v. Canada (Import Tribunal), [1990] 2 S.C.R. 1324, at pp. 1340-42. It is clear that an arbitrator has jurisdiction stricto sensu to interpret the provisions of a collective agreement in the course of determining the arbitrability of matters under that agreement. In that case the arbitrator is acting within his or her "home territory", and any judicial review of that interpretation must only be to a standard of patent unreasonableness. But this is a different case. Here, the viability and subsistence of the collective agreement is challenged. The company alleges that regardless of the interpretation of the agreement, it cannot survive to serve as the basis for this arbitration. The collective agreement is the foundation of the arbitrator's jurisdiction, and in determining that it exists or subsists the arbitrator must be correct.
I should also observe that my bifurcated analysis is made necessary by the fact that the arbitrator's decision intermingled deliberations on the specific terms of the collective agreement before him with his more general conclusions on jurisdiction. In saying this, I do not mean to impugn the methodology of the arbitrator. Arbitrators are often required to delve into the "merits" of the case to determine jurisdiction. Since jurisdiction depends upon an alleged breach of a collective agreement, the arbitrator must, in some instances, interpret the agreement even in the course of determining the question of jurisdiction. As in the present case, this inquiry may result in a duplication of the arbitrator's eventual examination of the merits of the grievance. This apparent conundrum is described in Palmer's Collective Agreement Arbitration in Canada (3rd ed. 1991), at p. 6:
. . . it must be stressed that in determining whether an issue is arbitrable reference must be made to the particular collective agreement involved. In so doing, a distinction must be drawn between procedural provisions in the collective agreement leading to arbitration and substantive provisions. Such procedural provisions do not give a right to have an issue determined through arbitration unless it also involved an alleged breach of a substantive provision of the collective agreement. In short, a matter only becomes arbitrable if a provision of the collective agreement has been violated.
So, an alleged violation of the agreement is a condition precedent of jurisdiction. The result, as Palmer notes at p. 27, is that "often the merits of a case are inextricably interwoven with its jurisdictional aspects." Indeed, a discrete body of arbitration law has evolved to guide arbitrators through this problem; see Palmer, at pp. 25-28. Thus, while the arbitrator in this case has quite properly addressed these interwoven aspects, this Court can untangle the strands and focus solely on the more general aspects of the question. Again, this is possible only because the company chose to restrict its appeal to the abstract question posed above.
In sum, the aspect of the arbitrator's decision that is challenged in this appeal is his finding that retirement rights are, in theory, capable of surviving the expiry of a collective agreement so as to provide a basis for a union grievance filed after its expiration. The union argues that the arbitrator was acting within his jurisdiction in making this decision, and that the decision should be reviewed only to a standard of patent unreasonability. It bases this argument on the statutory arbitration clause in s. 44 (2) of the Act, which for convenience I will repeat here:
44. . . .
(2) . . .
Where a difference arises between the parties relating to the interpretation, application or administration of this agreement, including any question as to whether a matter is arbitrable, or where an allegation is made that this agreement has been violated, either of the parties may, after exhausting any grievance procedure established by this agreement, notify the other party in writing of its desire to submit the difference or allegation . . . . The arbitration board shall hear and determine the difference or allegation and shall issue a decision and the decision is final and binding upon the parties . . . .
This clause is imported into the collective agreement by the operation of s. 44 of the Act. The union contends that the arbitrator here determined a "question as to whether a matter is arbitrable", and as such was acting within the jurisdictional confines of s. 44. In short, the argument is that the statute confers on the arbitrator the jurisdiction to decide his or her own jurisdiction, a view accepted by Blair J.A. in the court below. The company advances a competing interpretation of s. 44(2), focusing on the requirement that any dispute referred to arbitration must be a "difference [that] arises between the parties relating to the interpretation, application or administration of this agreement" (emphasis added). The company argues that the existence of a collective agreement is thereby a condition precedent to the arbitrator's jurisdiction, and that the arbitrability provisions in the section cannot prevail until there is a determination that a collective agreement is in existence. This argument must be considered with caution, as it appears to invoke the much-criticized "preliminary question" doctrine of judicial review. Underlying the argument, however, is the sound proposition that the meaning of the term "arbitrable" should be determined in part by the context in which it is found, a point to which I will return.
It is not necessary, however, to be preoccupied with the meaning of the term "arbitrable". The issue does not hinge on that term, rather it depends on a clear understanding of the term "jurisdiction". It is clear that the term "arbitrable" is generally used by labour lawyers as a synonym for "within jurisdiction", but this begs the question; as I will discuss below, and as this Court recognized in U.E.S., Local 298 v. Bibeault, supra, at p. 1087, "jurisdiction" itself is a fluid term. I would agree that the term "arbitrable" encompasses, in a restricted sense, a determination of whether the collective agreement under arbitration is in force. The decision of this Court in Bradburn, supra, is authority for this proposition. However, it is the import of that conclusion that is the real issue in this case. If the issue is arbitrable, then the arbitrator has jurisdiction, at least in the limited sense of being empowered to decide that question. The more difficult problem is whether that inquiry is within the arbitrator's jurisdiction stricto sensu. That is, does the arbitrator have the right to be wrong? That is the question on which this Court divided in Bradburn, and it is the question that falls to be decided here.
It may be helpful at this point to consider a brief review of arbitral jurisprudence under the Act prior to the Bradburn case, which will bring these jurisdictional questions into clearer relief. This history is traced by Palmer, supra, at pp. 95-98, and in Brown and Beatty's Canadian Labour Arbitration (3rd ed. 1992) at p. 4-1. Until 1961, the Act had assigned to the Labour Relations Board the exclusive jurisdiction to determine "whether a collective agreement has been made or as to whether it is in operation": The Labour Relations Act, R.S.O. 1960, c. 202, s. 79(1)(d). Although this provision was repealed in 1962 (An Act to amend The Labour Relations Act, S.O. 1961-62, c. 68, s. 13), arbitrators continued to refuse to proceed with an arbitration when one of the parties challenged the existence of the collective agreement at issue: see Re Bricklayers' & Masons' Union, Local 1, and Wilchar Construction Ltd. (1962), 12 L.A.C. 347; Re Fortune Footwear and United Textile Workers of Amercia, Local 369 (1980), 25 L.A.C. (2d) 350. The prevailing view was that arbitrators did not even have the power to decide the question, and the right to be wrong was never reached. This view may perhaps have been a carryover from the period when s. 79(1)(d) was in force, although the practice continued for some time. As late as 1978 the courts seemed obliged to state that exclusive jurisdiction for the board was "no longer the case"; see Re Carpenters' District Council of Toronto and Vicinity and Engineering Structures and Components (1978), 19 O.R. (2d) 445 (Div. Ct.), at p. 447; see also Re Bell Canada and Communication Workers of Canada (1980), 27 L.A.C. (2d) 163, at pp. 170-71. However, during this period some arbitrators developed the practice of pressing forward with the merits of a grievance, despite a challenge to jurisdiction. It was this practice that was approved in Bradburn, first by the Ontario Court of Appeal (1976), 13 O.R. (2d) 56, and ultimately by this Court. The grievance in that case was triggered by a strike that, according to the employer, was waged during the currency of a collective agreement. The issue for the arbitrator was whether the collective agreement was in fact in existence, which in turn required an interpretation of both the agreement and the Act. The arbitrator decided that point, a practice which was approved by the Court of Appeal, at pp. 61-62:
The final argument on behalf of the appellant was that a board of arbitration does not have the power to determine the very existence of the collective agreement. But here the board had to determine that threshold question and make the necessary preliminary assumption. It assumed that the agreement continued in operation and then proceeded with the hearing. It was a correct assumption and the proceedings were valid.
This method of proceeding, couched in terms of a "preliminary assumption", indicates the limited capacity then thought to exist for the arbitrator to decide such "threshold questions". As well, it is evident from these comments that there was no question but that the correctness of such assumptions would be open to judicial review.
This Court was unanimous in finding that the arbitrator in Bradburn had the power to determine the existence of the collective agreement, but divided on the appropriate scope of judicial review. Estey J., writing for the majority, endorsed the finding of the Court of Appeal, at pp. 854-55:
The threshold problem which reared its head at each level on which this debate has occurred is whether or not an arbitration board may properly interpret a collective agreement so as to determine whether the agreement was in effect at the time of the arbitration; in other words to determine whether or not the Board itself was properly constituted and was acting within the contractually conferred jurisdiction. Counsel for the appellant, in fairness to him, did no more than present the argument which I find sufficiently answered by the terms of s. 37(1) [now s. 44(1)] of The Labour Relations Act which make all matters subject to arbitration including "any question as to whether a matter is arbitrable." There is no other practical solution to this question because if the Board cannot determine whether the agreement continues in effect and hence its own proper existence, it is difficult to find the jurisdiction elsewhere. Of course if the Board is wrong in law as to the pendence of the collective agreement, its decision is a nullity, and thus within the reach of a court of law. [Emphasis added.]
Estey J. found that the board had jurisdiction in the sense of having the authority to decide the question of whether a collective agreement was in existence, and such authority was granted by the arbitrability provisions of s. 44(1). However, the board's determination was reviewable to a standard of correctness.
Laskin C.J., writing for the minority, took a different view of the task of the reviewing courts. He stated at pp. 848-50:
To me the threshold question is the scope of review of the decision of the arbitration board to which was referred the employers' claim for damages for an allegedly unlawful strike. Although review of the arbitration board's decision for error of law on the face of the record is open in the absence of a privative statutory provision, the concept of error of law is a very elusive one where it turns on the interpretation of words of a collective agreement which are involved in the arbitration. That is why courts generally, and certainly this Court, have taken the position that if the arbitration board has given the relevant words of the collective agreement an interpretation which those words could reasonably bear, they will not interfere with the arbitration board's determination.
There are two limitations on the policy of non-interference. The first is where a question of jurisdiction is involved, and the second is where a statute falls to be construed by the board of arbitration. . . .
The present case appears, at first blush, to involve both of the limitations on non-interference which I have mentioned. The grievance before the arbitration board was brought under the very collective agreement whose continued existence during the period of the strike was the only issue before the tribunal. Further, the effect of articles 13.01 and 13.02 of that collective agreement engaged, in the view of the arbitration board and of the Ontario Divisional Court and the Ontario Court of Appeal, certain provisions of The Labour Relations Act, R.S.O. 1970, c. 232 and especially s. 44 [now s. 52].
. . .
The parties here provided however, in their collective agreement that arbitrability should itself be within the jurisdiction of a board of arbitration, as indeed is directed by s. 37(1) of The Labour Relations Act. I consider the question of the duration or subsistence of the collective agreement under its termination terms to be subsumed under the issue of arbitrability confined to the board. It may be that prior to the enactment of s. 37(1) an issue of arbitrability, although one that a board could properly determine (lest it be stultified by a mere objection to its right to proceed), was fully reviewable as raising a jurisdictional question, but I do not regard this as any longer true in the light of s. 37(1) and of the provisions of a collective agreement which, as here, bring arbitrability expressly within the scope of authority of an arbitration board. [Emphasis added.]
As an aside, I note that Laskin C.J. was of the view that the arbitrator's decision was not protected by a privative clause, a conclusion that is implicit in the reasons of Estey J. However, what is more important in the present context is his conclusion that the language of s. 44 brings questions of arbitrability fully within the jurisdiction of the arbitrator, so that any decision could only be reviewed to a standard of patent unreasonability.
The decision of this Court in Bradburn is directly applicable to the present case and, despite the dissenting views of Laskin C.J., it would appear that the arbitrator's finding should also be reviewed to a standard of correctness. In Bradburn, the arbitrator was required to determine whether a collective agreement was in force at the time the employer's grievance arose. The same conceptual problem faced the arbitrator in the present case. Although the issue here is not whether the agreement is "in force" -- it is undisputed that the agreement expired prior to the grievance -- the broader question is the same as in Bradburn; does the collective agreement continue to determine the rights and obligations of the parties on the matter being grieved? As such, Bradburn appears to determine the proper scope of review, and it is for the union to demonstrate why we should disregard the majority judgment in that case in favour of the approach favoured by Laskin C.J. The union, though it did not argue the point in these terms, appears to rely on the argument that Bradburn has been overtaken by developments in the area of judicial review and should no longer be followed. I recognize, of course, that the law of judicial review has evolved since Bradburn, which was decided before the seminal judgment of Dickson J. (as he then was) in Canadian Union of Public Employees, Local 963 v. New Brunswick Liquor Corp., supra. Cases decided under the old paradigm remain relevant, but must now be examined in the light of the "pragmatic and functional approach" to judicial review since adopted by this Court; see U.E.S., Local 298 v. Bibeault, supra, at p. 1095.
I turn, then, to a consideration of the case from a pragmatic and functional perspective. To begin with, it may be helpful to recast the judgments of this Court in Bradburn in the newer terminology of the post-Bibeault era. In Bradburn both the majority and the minority found that the arbitrability provisions in the Act had some effect on the jurisdiction of the arbitrator. For Estey J., the provision enabled the arbitrator to decide the question but did not grant the power to be wrong. In the words of Beetz J. in Bibeault, the arbitrator in Bradburn did not have jurisdiction "stricto sensu". This notion was explained by Beetz J. as follows in Bibeault, at p. 1083:
S.A. de Smith (Judicial Review of Administrative Action (4th ed. 1980), at p. 114) defines a preliminary question as follows: "A preliminary or collateral question is said to be one that is collateral to `the merits' or to `the very essence of the inquiry'; it is `not the main question which the tribunal has to decide'" (footnote references omitted). In so far as the determination of whether the prerequisite has been met (the preliminary or collateral question) is not the main question which the tribunal has to decide, it is not within its jurisdiction stricto sensu. I say stricto sensu because the tribunal is generally required to decide the preliminary or collateral question as well, before exercising the powers it has, but as this question determines its jurisdiction it cannot err in deciding it. Any error in the matter amounts to a refusal to exercise its jurisdiction stricto sensu or an excess of jurisdiction stricto sensu by the Court, and makes its decision illegal and void. [Emphasis added.]
Employing this terminology, Laskin C.J. was of the view that s. 44 of the Act gave the arbitrator jurisdiction stricto sensu. This, then, is the fundamental point of departure between the two judgments, as stated in the terms employed in Bibeault. Of course, this terminology is drawn from the theoretical discussions in Bibeault, and as Beetz J. noted there at p. 1086, the theoretical basis of the preliminary or collateral question doctrine is "unimpeachable". But Bibeault instructs us to move beyond these theoretical constructs to a more functional and pragmatic analysis, focusing on the intent of the legislature. The question becomes, as Beetz J. stated at p. 1087: "Did the legislator intend the question to be within the jurisdiction conferred on the tribunal?" This is the new light by which the Bradburn decision should now be considered.
This Court has now applied the pragmatic analysis, with its various indicia of jurisdiction, in three cases: Bibeault itself, CAIMAW v. Paccar of Canada Ltd., [1989] 2 S.C.R. 983, and Canada (Attorney General) v. Public Service Alliance of Canada, [1991] 1 S.C.R. 614. Two other recent judicial review cases did not squarely address jurisdictional issues. In National Corn Growers Assn. v. Canada (Import Tribunal), supra, the jurisdiction of the import tribunal was assumed by the majority, as is noted in Wilson J.'s dissenting judgment. 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, jurisdiction of the tribunal was doubted by McLachlin J., but she proceeded on the assumption that the tribunal was acting within its jurisdiction. Consideration of the factors enumerated by Beetz J. can, therefore, be informed by reference to these decisions.
The starting point in this analysis is the wording of the statute. As is apparent from the discussion above, the wording of the precise grant of power in s. 44 is not determinative of the scope of an arbitrator's jurisdiction. Bradburn demonstrates that rendering a matter "arbitrable" under s. 44 does not thereby determine the jurisdictional content of that grant of power. We must look further afield, considering first the context of these words in s. 44, and the broader structure of the statute. In viewing the text of s. 44(2) as a whole, I have no doubt that the power to determine arbitrability will for many "matters" connote a grant of jurisdiction stricto sensu. Specifically, when the "matter" must be measured against the collective agreement to determine if it is arbitrable, the arbitrator will have the right to be wrong. This takes account of the entire purpose of the provision, which is to empower the arbitrator to deal with differences between the parties relating to the agreement. Moreover, this is in accord with the arbitrator's core area of expertise. After all, the most frequent challenge of an arbitrator's jurisdiction is an assertion by one of the parties that the incident underlying a grievance is not contemplated by the collective agreement. These issues are resolved by the arbitrator's application of the facts to the agreement as he or she interprets it, and this process is clearly intended to be left to the expertise of the arbitrator. However, when it comes to determining whether a collective agreement governs the rights and obligations of the parties irrespective of the interpretation of that agreement, the arbitrator has no benchmark; the existence or subsistence of the collective agreement itself is called into question. Although the arbitrator has the power to decide these questions, he or she must be correct in doing so.
To summarize, while the concepts of arbitrability and jurisdiction will frequently overlap, they are not synonymous. This distinction is illustrated by the reasons of the arbitration board in Re Goodyear Canada Inc. and United Rubber Workers, Local 232 (1980), 28 L.A.C. (2d) 196. There, the union alleged the breach of three successive collective agreements, in that the employer wrongfully deprived its employees of premium pay during the continuance of these agreements. The employer argued that the arbitration board had jurisdiction only as regards the current agreement, and the board accepted that position, clarifying the scope of its decision in the following manner, at p. 197:
The parties agreed that the board should determine the preliminary issue of its jurisdiction before proceeding to the merits of the grievance. This award is therefore restricted to that issue. For the purposes of clarity, it should be emphasized that the issue is whether this board is properly constituted to hear the grievance in relation to the expired collective agreements. That is a question separate and distinct from whether the grievances should, having regard to delay, the conduct of the parties or any other factor, be found to be arbitrable by a board of arbitration properly constituted to hear them. [Emphasis added.]
Thus "arbitrability" did not go to the larger jurisdictional question before the arbitration board in that case. In the course of its reasons, the board made the following comments, at p. 200:
. . . it is entirely proper for a board of arbitration constituted by the parties under an agreement or its statutory extension to rule on its own jurisdiction to hear a grievance arising out of the same agreement.
. . .
When a board of arbitration that has been constituted by the agreement of the parties under a given collective agreement rules on its own jurisdiction to hear a grievance arising under the same agreement it does no procedural violence to the statutory scheme whereby disputes between the parties are to be resolved. The question is whether it does so when it goes beyond the bounds of that agreement. [Emphasis added.]
The board answered its own question in the affirmative. In other words, an arbitration board can properly take jurisdiction over grievances as they pertain to the collective agreement under which it is appointed, but when there is a dispute over whether the grievance pertains to some other agreement (or as the company alleges here, that it pertains to no agreement at all) then the board must determine its jurisdiction, and it must be correct in so doing.
The conclusions that emerge from the wording of the statute are confirmed by considering the role of the arbitrator within the arbitration scheme established by the Act. I have already reviewed the historical unwillingness of arbitrators to even consider the kind of question that arises in this case. It is important to note that this reluctance was not out of some sense of deference to the courts, but out of deference to the Labour Relations Board, which was thought for a time to have exclusive jurisdiction in the area. It will be recalled that until 1961 the Act reserved to the board the jurisdiction stipulated in what was then s. 79(1) in the following terms:
79.--(1) The Board has exclusive jurisdiction to exercise the powers conferred upon it by or under this Act, and, without limiting the generality of the foregoing, if any question arises in proceedings,
. . .
(d)as to whether a collective agreement has been made or as to whether it is in operation or as to who the parties are or who are bound by it or on whose behalf it was made;
. . .
the decision of the Board thereon is final and conclusive for all purposes . . . .
With the repeal of this provision in 1961, the jurisdiction over determinations of the status of collective agreements was uncertain. However, practice belied any uncertainty, as arbitrators continued to defer to the board: see Re De Havilland Aircraft and United Automobile Workers (1976), 13 L.A.C. (2d) 401, at pp. 404-7. A significant development occurred in 1975, with the addition of s. 112a to the Act; see An Act to amend The Labour Relations Act, S.O. 1975, c. 76, s. 30. This provision, which today is s. 124, gives the board power to hear grievances in the construction industry in exactly the same fashion as grievances filed with arbitrators under s. 44. In effect a "parallel jurisdiction" was established; see Re Carpenters' District Council, supra.
Thus, arbitrators would often defer to the board on questions pertaining to the existence of a collective agreement. Indeed, it is useful to compare the roles of the board and the arbitrator under the Act, and the different jurisdictional grants arising therefrom. A good starting point is to recall the strong privative clause in s. 108 which shields the board from jurisdictional review. It may at first glance seem inappropriate to consider the question of privity in the context of jurisdiction, but I do not think the scope of judicial review should be approached in a purely linear analysis of considering first jurisdiction and then searching for privative clauses shielding that jurisdiction. The process is more fluid than this, and the presence or absence of privative words is an indication of the scope of jurisdiction intended by the legislature; see, Paccar, supra, at pp. 1003 et seq., and Public Service Alliance of Canada, supra, at p. 661. Here, the privative clause in s. 108 applies only to the board, and there is no comparable provision with respect to the arbitrator. The union contends, however, that the phrase "final and binding . . . between the parties" in s. 44 constitutes a privative clause, a contention accepted by the Court of Appeal. However, the most that can be said for the phrase is that it has limited privative effect on the issues in this appeal. That, indeed, may be going further than past decisions of this Court. In Douglas Aircraft, supra, a case involving s. 44 of the Act, Estey J. discussed the question of privity at p. 264 and apparently refused to even consider s. 44 as a privative clause:
This case raises the difficult and fundamental question as to the scope for judicial review of a labour arbitration board's decision. Such an arbitration board is not, by the terms of The Labour Relations Act, R.S.O. 1970, c. 232 as amended, protected from judicial review by certiorari or otherwise as is the Ontario Labour Relations Board established under that Act, because the section in question, generally referred to as a privative clause, is limited to the Ontario Labour Relations Board. Vide s. 97, The Labour Relations Act.
Although Estey J. was dissenting in Douglas Aircraft, the majority appears to have concurred with his approach to the interpretation of the Act. As such, this Court has, by inference at least, ruled against the privative effect of s. 44.
Whatever the status of the clause in s. 44, the section should be contrasted with the strong and explicit privative clause in s. 108 protecting decisions of the Labour Relations Board. Clearly, if the legislature had intended to mandate the same judicial deference to an arbitrator as to the board, it could simply have brought the arbitrator under the shelter of s. 108. That is not the case, and I am left with the conclusion that the legislation contemplates a more limited shield against judicial review for decisions of an arbitrator. The Court of Appeal came to a very different conclusion based on certain jurisprudence in Ontario, culminating with Metropolitan Toronto (Municipality) v. C.U.P.E., Loc. 43, supra, which has found that the "final and binding" clause, and like terminology in other statutes, constitutes a "form of privative clause" (at p. 275). As I understand the reasoning in this case law, it is based on a combination of the words themselves and a judicial policy of deference to the decisions of labour arbitrators. However, I have grave doubts as to the merits of this approach, at least in so far as it is used (as here) to elevate statutory words to a privative status not intended by the legislature. In this regard, I recognize that in National Corn Growers, supra, this Court found privative effect in the following phrase in s. 76 of the Special Import Measures Act, S.C. 1984, c. 25: ". . . every order or finding of the Tribunal is final and conclusive." But the findings in National Corn Growers involved different words in a different statutory setting. One could quibble over the distinctions between the phrases "final and conclusive" and "final and binding upon the parties", and to me the latter phrase does import less privative effect. But the important point is that the driving factor in that decision was not the clause alone but deference to the relative expertise of the administrative tribunal over the specialized questions involved. I do not think that decision precludes a determination that s. 44 of the Act in this case does not have privative effect.
Thus far, I have undertaken a functional analysis with respect to the wording of the statute and by comparing the jurisdictional grant with that afforded the board under the Act. A final factor I wish to address is the purpose of arbitration and the expertise of arbitrators. This is perhaps a mélange of several factors identified by Beetz J. in Bibeault, supra: the purpose of the statute, the reason for the tribunal's existence, the expertise of its members, and the nature of the problem before it. In this case at least, I find these factors so intertwined as to be most conveniently considered in one analysis.
The jurisprudence of this Court, along with others, is clear on the purpose behind statutory arbitration of collective agreements -- it is to provide for the speedy resolution of disputes over the administration of a collective agreement with minimal judicial intervention; see Public Service Alliance of Canada, supra, at pp. 634 and 661. More generally, administrative tribunals exist to allow decisions to be made by a specialized tribunal with particular expertise in a relevant area of law; see National Corn Growers, at p. 1346. What, then, is the expertise of a labour arbitrator? Undoubtedly it is the interpretation of collective agreements, and the resolution of factual disputes pertaining to them. An arbitrator's expertise is in a limited sense related to labour relations policy, but it must be conceded that it falls short of the wide ranging policy-making function sometimes delegated to labour boards, as in Paccar, supra. In short, an arbitration board falls towards the lower end of the spectrum of those administrative tribunals charged with policy deliberations to which the courts should defer. Similarly, tribunals vested with the responsibility to oversee and develop a statutory regime are more likely to be entitled to judicial deference: see Paccar, at p. 1003, and Public Service Alliance of Canada, at pp. 662‑63. By contrast, in Bibeault the labour commissioner whose jurisdiction was at issue was not charged with the implementation of a statutory scheme, a factor mitigating against the commissioner's jurisdiction.
In the present case, the Labour Relations Act clearly assigns a general supervisory role to the Ontario Labour Relations Board. Its mandate is set out in s. 103 under 11 heads of power, including the right to inquire into any alleged contravention of the Act. Moreover, the board may decide references from the Minister of Labour, pursuant to s. 107. As already discussed, the decisions of the board are shielded by a strong privative clause, s. 108. In contrast, the arbitrator's role is confined to the resolution of grievances under a collective agreement. In my view, the relative expertise of board members and arbitrators must be presumed to be commensurate with the scope of these divergent statutory mandates.
Having considered the statutory mandate and expertise of an arbitration board, the next step is to evaluate the extent to which the present case turns on questions falling within that area of expertise. In Paccar, for example, I found that the question there at issue fell within the expertise of the board. In particular, I rejected the argument that certain common law principles were in play, thereby closing the gap between the expertise of the tribunal and the overseeing courts. This result can be contrasted with Bibeault where the question to be decided turned on an evaluation of the civil law and, as such, fell outside the tribunal's exclusive expertise. In my view, the present case is like Bibeault. Here, the question to be decided requires consideration of concepts that are analogous to certain common law notions -- "vesting" and accrued contractual rights -- that fall outside the tribunal's sphere of exclusive expertise. I do not wish to suggest that arbitrators are not competent to apply common law concepts -- they obviously tap into common law principles every day in the course of their decision making. But in these matters the arbitrator has no exclusive or unique claim to expertise.
In conclusion, a functional analysis of the jurisdiction of the labour arbitrator in this case leads to the same conclusion as was reached by this Court in Bradburn, supra; in deciding whether a collective agreement continues to determine the rights and obligations between the parties, the arbitrator is required to be correct. The remaining question, then, is whether the arbitrator was in fact correct in determining that he had jurisdiction to hear this grievance.
In the course of these reasons, I have commented only in a tangential way on the proper standard of review for questions clearly within the jurisdiction of the arbitrator. I have now had the advantage of reading the reasons of my colleague, Justice Cory, which for the most part relate to this issue. I have not dealt with this point at length because the entire focus of this part of my reasons has been to deal with the sometimes difficult issue of whether the question is a jurisdictional question or one that is a question within jurisdiction, using the pragmatic and functional approach from Bibeault, supra. A careful consideration of whether a question goes to jurisdiction is required if the objective, shared by Cory J., is to be reached of limiting excessive review of administrative tribunals. Cory J. suggests at p. 000 that the rules related to the standard of review should be "simple, straightforward and easy to follow". While this would appear to be a desirable objective, as Beetz J. quite properly recognized in Bibeault, what is apparent in theory is sometimes complex in practice; what is or is not a jurisdictional question sometimes requires more effort and elaboration.
On issues within jurisdiction, I do not attach the importance to the difference in the wording of "final and conclusive" and "final and binding" that Cory J. attributes to me. I do not believe that one is simply privative and the other not. The difference between these phrases is much less significant than that between either of them and the expansive privative clause in s. 108 that protects decisions of the Labour Board. More importantly, this small distinction is more significant in determining whether a question is a jurisdictional one or within jurisdiction than in considering the standard of review for questions within jurisdiction. I cannot accept that courts should mechanically defer to a tribunal simply because of the presence of a "final and binding" or "final and conclusive" clause. These finality clauses can clearly signal deference, but they should also be considered in the context of the type of question and the nature and expertise of the tribunal.
I should mention one final matter on this point. The classification of the error in this case as one of jurisdiction is the ground on which the company sought review on the basis of correctness. Having found the argument on this point convincing, we need not assess whether there are other questions of law on which the arbitrator needs to be correct. As I noted in Canada (Attorney General) v. Mossop, [1993] 1 S.C.R. 554, while courts will defer to arbitrators or other tribunals on certain determinations of law having regard to their relative expertise or to the role or functions accorded to them under their constituent legislation (including issues relating to efficiency), other more general questions of law unrelated to these factors do not call for the same level of judicial deference. For the purpose of deciding whether a question is one on which deference should be shown, the courts may have recourse to many of the same factors that have been used in a pragmatic and functional approach to jurisdiction. These issues do not, however, arise in this case and I shall make no further comment about them.
2. The Survivability of Retired Workers' Group Insurance Benefits
I turn now to the substance of the decision under review. The arbitrator found, as a general proposition, that it is possible for a promise of retirement benefits to survive the expiry of the collective agreement in which it is found. For the reasons that follow, I think he was correct in so doing.
The arbitrator's analysis was in two phases. First, he found that the mere expiry of a collective agreement, without more, does not preclude the arbitrability of a grievance alleging a breach after that expiry. So long as the grievance is grounded in that collective agreement, the matter remains arbitrable. Second, he considered whether retirement benefits are capable of vesting so as to form the requisite basis for a grievance after the agreement's expiry. In my view the first step in the arbitrator's methodology is unimpeachable. I also agree with the second phase, although I would state two provisos.
First, it may be that the arbitrator strayed further than necessary into the merits of the particular agreement before him in determining the general question of whether retirement benefits are capable of vesting. I have already considered the possible reasons for this, but in any event I do not think that this overreaching (if it was that) impugns his conclusions on the more general question at issue in this appeal. While the arbitrator did not establish a distinction between a general and specific level of analysis with complete clarity, it is nonetheless possible to assess most of his reasons from the perspective of the more general question here at issue. My second proviso is with respect to the use of the term "vested right" by the arbitrator. I will consider this term in some detail below, but I would for now mention that the term must be used advisedly, as it can carry many different meanings. In the end, I agree with the arbitrator's finding to the extent that retirement benefits can (depending on the wording of the collective agreement) vest in a collective sense for the benefit of retired workers, and any reduction in those benefits would be grievable at the instance of the union. Whether this vesting also creates a personal right actionable by individual retirees is a question that need not be decided in this appeal.
Before delving into the details of the arbitrator's decision, several general comments should be made. First, it seems to me that the question at issue is an abstract one for which guidance can be found by reference to certain analogous (and perhaps binding) concepts in the common law of contracts. I am aware, of course, that common law principles do not automatically apply in every instance in the interpretation of a collective agreement: see McGavin Toastmaster Ltd. v. Ainscough, [1976] 1 S.C.R. 718. However, I do not think the law of contracts need be (or can be) disregarded altogether in determining the status of a collective agreement: see Palmer, supra, at pp. 142-43. The analogy I would draw is to the common law notion of termination of a contract. A collective agreement is rather like a contract for a fixed term. At the end of the term, the contract or agreement is said to "expire" by mutual agreement. But the contract is not thereby rendered a nullity. It ceases to have prospective application, but the rights that have accrued under it continue to subsist. This termination or expiration can be contrasted with the contractual notion of rescission, whereby the contract is rendered null and void, and the parties have no obligations thereunder: see Anson's Law of Contract (26th ed. 1984), at pp. 428-39; Atiyah, An Introduction to the Law of Contract (4th ed. 1989), at pp. 411-32. Thus it should not be seen as a novel concept that grievances can arise after the expiration of a collective agreement that relate to rights accruing under that agreement. It seems to me that it would take very clear words to demonstrate that the parties intended to rescind their agreement by agreeing to enter into a succeeding agreement. Rather, the presumed intention is only that the prospective relationship between the parties is to be governed by the new agreement, and that the old agreement ceases to have any relevance to that ongoing relationship.
Counsel for the company submitted that the concept of "vested rights" has no place in a collective bargaining context, where every collective agreement is viewed as a fresh start, revoking the agreement that came before. This view, commonly stated by labour lawyers, must be restricted to the context of the prospective relationship between the parties. Terms such as "revoking" or "displacing" the prior collective agreement should be taken to mean simply that the old agreement ceases to have prospective effect. An example of the use of the terminology in its proper context is found in an early arbitral decision of Gale J. (as he then was), writing for an arbitration panel in In re De Havilland Aircraft of Canada Ltd. and U.A.W., Local 112 (1950), 2 L.A.C. 465, at p. 468:
The very purpose of the new Agreement was to set up the Contract between the Company, the Union and the individual employees and it is perfectly apparent that it was intended to displace any Contract or Contracts which had theretofore existed. If it were otherwise, all parties would be constantly in doubt as to whether they were bound by the terms of Contracts apparently no longer in force. It is our view that the whole theory of collective bargaining demands that the current Collective Agreement is to contain and represent the whole Agreement between the parties.
The new agreement "displaces" the old one, which is no longer in force. But this is with respect to the current employment relationship, and says nothing about the previously accrued rights of the parties; see also Re United Steelworkers, Local 5951 and Medland Enterprises Ltd. (1963), 14 L.A.C. 55. Another example of the importance of context is seen in Brown & Beatty, supra, where the authors speak of a new agreement "extinguishing" the terms of the old agreement. This may be an unfortunate term, which suggests some retroactive rescission of contractual obligations between the parties. However, it is clear from the cases cited by the authors that any extinguishment has prospective effect only. Other cases on this point are reviewed below, and I have found no case that suggests that accrued rights are expunged once a new collective agreement is negotiated. Moreover, I see nothing differentiating the promise to pay retirement health benefits from promises to pay regular wages or vacation pay. All of these can be enforced after the termination of the agreement. Any other conclusion would render meaningless a wide range of promises to employees that might extend beyond the expiration of a collective agreement. In addition to unpaid wages and retirement benefits, disability benefits owing to former employees and pension benefits to retired workers would also be placed in jeopardy.
It goes without saying that these propositions do not affect the prospective relationship between the parties to a collective agreement. During the interregnum, if any, between collective agreements, the parties are free to govern their current employment relationship in any way they choose; see Paccar, supra. The employer is free to disregard the terms of previous collective agreements and set new terms of employment. As such, it is certainly true that in the vacuum that may arise between collective agreements workers have no subsisting rights from the collective agreement that govern their current employment relationship. However, the old collective agreement is not rendered a nullity. Rights that have accrued under that agreement remain enforceable.
I should refer at this point to a recent decision of this Court, Hémond v. Coopérative fédérée du Québec, [1989] 2 S.C.R. 962, in which we ruled that seniority rights granted to a worker in a collective agreement do not vest in that worker. That is, a later collective agreement can derogate from rights granted to individuals under a previous agreement. In that case, workers were promoted into management, and were thereby excluded from the bargaining unit. When they were demoted some years later, and resumed their place in the bargaining unit, the collective agreement then in force provided seniority rights weaker than those in the collective agreement when they left. Gonthier J., writing for the Court, rejected arguments that the previous seniority rights had vested in the workers. He stated at p. 975:
It cannot be said that the union in the case at bar did not have the right to alter respondents' seniority rights by means of a subsequent collective agreement. . . .
Though it is possible in some cases to interpret a collective agreement so as to give seniority rights to certain workers, one cannot simply ignore the terms of such an agreement in order to give employees vested rights in the matter. Seniority rights are subject to the collective bargaining process like any other employee right. In the context of labour relations it would be singular, to say the least, for these rights to be absolutely and irremediably raised to the level of vested rights. When a collective agreement exists, individual rights are for all practical purposes superseded. [Emphasis in original.]
In my view, there is nothing in the judgment of Gonthier J. that is inconsistent with the concept of vested retirement rights, and I would distinguish Hémond on the following basis. First, there is no doubt that the prospective employment relationship can only be governed by one collective agreement, and that the most current. While an employee continues to be a part of the bargaining unit, he or she is of necessity subject to the vicissitudes of the collective bargaining process. However, on retirement a worker withdraws from that relationship, and at that point his or her accrued employment rights crystallize into some form of "vested" retirement right. It is quite possible that this right may only be enforceable through collective action by the union on the retirees' behalf. However, if that is the case, this arises out of structural peculiarities of our labour law system rather than any apparent point of principle.
Keeping these general observations in mind, I turn to consider the arbitrator's two propositions in detail.
(i)The Arbitrability of Grievances that Accrue During the Currency of an Expired Collective Agreement
The first step in analyzing the arbitrability of an expired collective agreement is to determine the general question of whether such expiry forecloses the ability of parties to grieve matters that arose during the currency of the agreement. The parties advance two distinct approaches to this problem. The company urges an approach that focuses on the incident by which the collective agreement was breached, and contends that any breach that occurs after the expiry of an agreement is not arbitrable. The respondent counters that the proper focus is the time at which the rights being grieved had accrued. Under this approach, the time of breach is irrelevant, so long as the right being breached accrued during the currency of the collective agreement. In my view, this latter approach is the only feasible means of determining an arbitrator's jurisdiction.
The respondent's position is supported by the case law, as developed both by labour tribunals and lower courts. The leading case is perhaps an Ontario Labour Relations Board Decision, Genstar Chemical Ltd. v. I.C.W.U., Local 721, [1978] O.L.R.B. Rep. 835. There, one union displaced another as bargaining agent after a certification battle between the unions. The effect of the change of bargaining agents was to terminate the existing collective agreement. The employer had withheld union dues under the old agreement, and sought to pay them over to the winning union as the current bargaining agent. The old union grieved the matter under the expired collective agreement, and the board upheld the jurisdiction of an arbitrator to hear the grievance. Its conclusion, at pp. 837-38, is as follows:
Our conclusion is that the policy mandated by section 37 [now s. 44] of the Act requires that all grievances which relate to events arising during the term of a collective agreement may be submitted to arbitration, even though the grievance is not filed until after the agreement has expired. In the Board's view, rights which accrue to a party during the life of a collective agreement are in the nature of vested rights which are not automatically extinguished by the termination or expiry of the collective agreement under which they arose. To hold otherwise would be to, in effect, give both employers and unions a licence to violate the terms of collective agreements in the period immediately preceding their expiration. [Emphasis added.]
Similar conclusions can be found in other tribunal decisions; see Re Goodyear Canada Inc. and United Rubber Workers, Local 232, supra; and Re International Chemical Workers, Local 564, and Cyanamid of Canada Ltd. (1969), 20 L.A.C. 111 at p. 114.
The context in which the board in Genstar employed the term "vested rights" should be noted at this juncture. Given the nature of the dispute there, the term "vested" as used by the board must be taken to mean only that vested rights are not automatically extinguished by the expiry of the collective agreement. Vesting in this context says nothing of the ultimate indefeasibility or inviolability of the rights. As we shall see, this "weak form" of vesting is sufficient to determine the result in this case. Since the retirement benefits here were not withdrawn by any subsequent agreement between the parties, there was no opportunity for the retroactive extinguishment of the rights which accrued under the expired agreement. This conclusion determines the result in this case, but I prefer to go beyond this minimum to explore the true nature of vesting in the context of retirement benefits.
The decisions of lower courts are consistent with the Genstar approach. The leading case is Re Red River Division Association and Red River School Div. (1972), 25 D.L.R. (3d) 106 (Man. Q.B.). There, a teachers' union grieved a series of past collective agreements over salary disputes. The school board objected to the arbitrator's jurisdiction, but the union obtained a mandamus order to compel the arbitrator to hear the case. Wilson J. considered and rejected the school board's argument that the arbitrator lacked jurisdiction. At page 109 he stated:
Denial of jurisdiction rests on the argument that, the collective agreements under which the board was convened and under which the disputes arose having terminated, their effect is wholly spent. Hapless indeed, then, the plight of a teacher whose difference arises sometime in the afternoon of December 31st; and what if, say, a dispute arises touching her December salary, her earliest awareness of such grievance coming with receipt of a cheque for the wrong amount, on January 2nd? Counsel for the division says that such differences would disappear as would those which gave rise to the application itself, had the parties written into their agreement a clause to provide that, notwithstanding the termination date of their contract, the provisions for arbitration would be deemed to continue in effect for settlement of disputes prior to the expiry date of the contract.
Wilson J. then advanced the following proposition in support of the arbitrator's jurisdiction, at p. 112 and at pp. 113-14:
No one suggests that with the expiry of the contract the rights of either party accrued thereunder are at an end, and in particular the right to payment of the salary earned under such contract. And, if the right persists, why should the collateral right of resort to the machinery which the contract provides for the settlement of the dispute, i.e., to fix the salary, not persist also?
. . .
To close, then, expiry of the contract out of which the claim arises does not, without more, put an end to the right of either of the parties to the agreement to call for settlement of a dispute arising thereunder in accordance with the arbitration procedure to that end established by their contract, when the dispute concerns the existence of a benefit allegedly vested during the term of the agreement in question, and is within the terms of reference of the arbitration clause. [Emphasis added.]
This finding was applied in Re Ontario Public Service Employees Union and The Queen in right of Ontario (1985), 51 O.R. (2d) 474 (Div. Ct.), a similar case.
The company, as I have noted, argues that the real issue in this debate is the timing of the breach of the collective agreement. To understand the thrust of the company's argument on this point, it is necessary to appreciate what the court below found. For the company, the key reasons of Blair J.A. are found in the following passage at pp. 661-62:
The company conceded that grievances based on events which occurred during the currency of a collective agreement were arbitrable even if the grievance was lodged after the termination of the agreement, as the Ontario Labour Relations Board held in Genstar. . . .
However, courts have gone further in holding that arbitrators have jurisdiction to deal with grievances based on events occurring after the termination of collective agreements. [Emphasis added.]
Blair J.A. went on to review Re Red River Division Association, supra, and Re O.P.S.E.U., supra, as authority for this proposition. It is this second (underlined) proposition that troubles the company, as it appears to refute its "incident of breach" theory. As such, counsel devoted a considerable portion of his written and oral argument to refuting it. I will not delve into the intricacies of this argument. It is sufficient to say that I agree that the cases do not stand for the proposition advanced by Blair J.A. That being said, I do not see how a refutation of this proposition assists the company. What the cases clearly state, and the company appears to concede this point, is that certain rights vest or accrue during the currency of the collective agreement and do not expire on the agreement's termination.
In my view, the law as stated in Genstar and Re Red River Division Association is correct. As a simple principle of contract law, the enforcement of a contract can take place well after the contract itself has expired. What is at issue in these cases is exactly that -- the enforcement of the collective agreement to rectify damage appearing after the expiration of the agreement. Accepting the thrust of the law established in Genstar, I can deal quickly with the company's arguments on this point. In its written submissions it argues that "under Canadian law, the parties to a collective agreement may not provide in the collective agreement for any rights or benefits to endure beyond the term of the collective agreement." This, of course, is contrary to the position taken in Genstar. The company's other key argument is that "[t]he Union has cited no Canadian case in which a term of a collective agreement was found to survive the expiry of the agreement." This is true enough, but I think it is a mischaracterization of the union's position. It is not the survival of the term per se that allows for arbitrability -- no one disputes that the term is extinguished in the sense that it has no prospective application. Rather it is that the rights created by that term vest or accrue. This rather fundamental distinction was simply not addressed by the company.
I should at this point turn to the cases in support of an "incidents" approach to an arbitrators' jurisdiction. The company submits that these cases focus on the time of the breach rather than the accrual of rights as the date for determining arbitrability. However, I am satisfied that these cases, while employing the terminology of "incidents", are referring to the incident or event out of which the rights accrued, rather than the time at which these rights are breached. What must be emphasized is that in the cases cited on behalf of the company, the two time periods happen to coincide. For example, in Re Communications Union Canada and Bell Canada (1979), 23 O.R. (2d) 701 (Div. Ct.), the grievance involved a wildcat strike. In that instance the right accrued and was breached at the time of the strike, and in that context there was no need to distinguish a time of accrual -- the issue simply did not arise. Accordingly it was appropriate for Henry J., at p. 709, to state that arbitrability was determined by the time at which "the grievance arose".
The company relies on Hamilton Civic Hospitals v. Canadian Union of Public Employees, Local 794, [1983] O.L.R.B. Rep. 371, where the Ontario Labour Relations Board considered the following question referred by the Minister of Labour, at p. 371: "whether or not the Minister has the authority to appoint a single arbitrator where no collective agreement is in operation between the employer and the trade union." The board couched its response to the question in "incidents" terminology. After reviewing Genstar with approval, the board stated the law in this way, at p. 380:
. . . where the incident or event giving rise to a grievance occurs during the life of a collective agreement, the parties to that agreement have a "vested right" in its enforcement even though the request for the appointment of an arbitrator is not made until after the agreement expires. [Emphasis added.]
The fact that this statement was made after a review and approval of Genstar suggests to me that the board intended the term "incident or event giving rise to a grievance" to refer to the time at which the right accrued.
A final case cited for the company is NOA v. Burns Meats Ltd. (1986), 74 A.R. 352 (Q.B.), a case of wrongful dismissal. Once again, this kind of breach is coincident with the accrual of the underlying right. As such, it is understandable that the decision uses the language of an "incident" or a "breach". By contrast, the Red River cases involve the accrual of rights over a period of time. Different language is required in that instance, but the underlying concept in both lines of cases is the same.
I should note that there is strong American authority for the concept of vested collective agreement rights, the leading case being John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543 (1964). I will consider this decision in some detail later under the analysis of vested retirement rights, but for now I would note that the case affords persuasive support for the Canadian position advanced in the tribunal and court decisions discussed above.
In summary, then, the case law is clear that workers' rights under a collective agreement can survive the expiry of that agreement. As I have noted, the acceptance of this proposition may of its own accord enable this Court to conclude that the arbitrator was correct: the second phase of his analysis is really just an application of the general principle to the specific case of retirees' benefits. However, as the nature of these particular rights is important, I will go on to assess that more specific question.
(ii) Vesting of Retirement Benefits Promised in a Collective Agreement
The question of vested retirement benefits is relatively novel in Canada, but there is a substantial body of American case law on point. The leading case appears to be U.A.W. v. Yard‑Man, Inc., 716 F.2d 1476 (6th Cir. 1983), certiorari denied, 465 U.S. 1007 (1984), which is relied upon by the union as a case with similar facts in which retirement benefits were found to have vested in the hands of retired workers despite the termination of the underlying collective agreement. However, in the courts below and in argument before this Court, the company contended that the American jurisprudence should not be followed, as it is grounded in certain statutory elements unique to American labour law. This argument was rejected by Blair J.A. in the court below, who concluded that the American cases were of persuasive value. He stated at pp. 663-64:
The difference between the governing statutes in United States and Canadian labour law were discussed in argument. It is obvious that United States decisions under the Wagner Act cannot bind Canadian courts because of the difference in the statutory treatment accorded retiree benefits. In the United States, such benefits are subjects of permissive bargaining as opposed to other matters for which bargaining is mandatory. This mandatory-permissive dichotomy does not exist in Canada where all provisions of a collective agreement are subjects of mandatory bargaining. However, much of what was said by the Court of Appeal in Yard-Man is unrelated to that distinction.
. . .
While jurisprudence from foreign countries is not binding on this court, the logic expressed in it can be of great assistance particularly in analyzing new problems.
For the reasons that follow, I am in substantial agreement with Blair J.A. on this point, although I find it necessary to delve somewhat further into the American law to determine more precisely the applicability of the American position in a Canadian context. In my view, the different labour relations structures in the two countries point to only one potential difference in the conception of "vested" retirement benefits. This difference aside, the following propositions hold true in both countries: retirement benefits are in the nature of accrued rights; those benefits may (depending on the terms of the agreement) vest; and the vested rights can be enforced by union grievance on behalf of retirees. The sole difference is remedial in nature. In the United States the term "vested retirement benefits" connotes a right that is enforceable at the instance of an individual retiree, without resort to assistance from his or her former bargaining agent. Such enforceability may not be available in Canada, although I find it unnecessary to decide that point in this appeal.
(a) American Law
The American position on retirement benefits must, no doubt, be understood in the context of their laws. However, I agree with Blair J.A. that much of the American position is unrelated to any distinction that can be drawn between Canadian and American labour statutes. A useful, although somewhat dated, comparison of the systems in these countries is found in B. L. Adell's, The Legal Status of Collective Agreements in England, The United States and Canada (1970). Three American statutes must be considered. First, of course, is the National Labor Relations Act ("the NLRA"), which stipulates certain issues that management and labour must, as a minimum, bargain over in the course of arriving at a collective agreement. These mandatory subjects of bargaining are "rates of pay, wages, hours of employment, or other conditions of employment": 29 U.S.C. § 159(a). This list encompasses welfare benefits for active employees, but benefits for retirees are permissive rather than mandatory subjects of bargaining; see Chemical and Alkali Workers v. Pittsburgh Plate Glass Co., 404 U.S. 157 (1971). The parties are free to bargain about such permissive subjects, but a party can refuse to discuss a permissive subject, and the other cannot insist upon discussing that issue as a condition precedent to a collective agreement. The dichotomy between mandatory and permissive subjects for bargaining has not been adopted in Canada, which requires good faith bargaining on all issues. The company argues that this difference serves to distinguish the American case law. In its submission, the permissive nature of bargaining over retirement benefits in the United States results in a greater entrenchment of such rights -- a union can refuse to even discuss the issue, leaving the existing benefits untouched. In my view, this is a mischaracterization of the American position, and even if it were accurate it would not assist the company in this case, as the argument implicitly accepts the notion that retirement benefits are not automatically extinguished on the expiration of a collective agreement. I will return to this issue in greater detail below.
A second statute to note is the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1001 et seq., enacted by Congress in 1974. ERISA governs private pension plans in the United States, much like provincial Pension Benefits Acts in Canada. ERISA divides employee benefit plans into two distinct categories: "welfare plans" and "pension plans". The former encompasses the benefits in question in this appeal. ERISA stipulates that pension plans be "nonforfeitable" upon the attainment of normal retirement age: 29 U.S.C. § 1053. That is, the pension must vest. However, welfare plans are explicitly exempted from this requirement: 29 U.S.C. § 1051. This exemption does not prohibit an employer from extending welfare benefits beyond the expiration of the collective bargaining agreement; it merely leaves that possibility to be determined by the parties during collective bargaining; see United Food and Commercial Workers Int'l Union v. Dubuque Packing Co., 756 F.2d 66 (8th Cir. 1985), at p. 70. The cases that consider the distinction between welfare and pension benefits cite it as evidence that there is no federal labour policy favouring the vesting of welfare benefits, thereby refuting any argument by retirees that an intention to vest such benefits should be inferred; see Anderson v. Alpha Portland Industries, Inc., 836 F.2d 1512 (8th Cir. 1988), at p. 1516.
The final legislative provision of some consequence is § 301 of the Labor Management Relations Act (the "LMRA"), 29 U.S.C. § 185 (a), which reads:
Suits for violation of contracts between an employer and a labour organization representing employees in an industry affecting commerce as defined in this chapter, or between any such labour organizations, may be brought in any district court of the United States having jurisdiction of the parties, without respect to the amount in controversy or without regard to the citizenship of the parties.
This provision gives the federal courts jurisdiction to hear suits for breach of a collective agreement. The provision is not restricted to the parties to the collective agreement, and third parties can sue for breach of an agreement that affects them. As such, retired employees can sue either their former employer or their former bargaining agent for breach of the terms of a collective agreement; see Pittsburgh Plate Glass Co., supra. As a general rule litigants must first exhaust arbitration remedies available under the collective agreement before turning to the courts, but retired workers, who are no longer part of the bargaining unit, are exempted from this requirement, and they are free to sue in the courts without first seeking a union's assistance to file a grievance; see Anderson v. Alpha Portland Industries, Inc., 727 F.2d 177 (8th Cir. 1984), rehearing en banc 752 F.2d 1293 (1988), certiorari denied, 471 U.S. 1102 (1985); see also Schneider Moving & Storage Co. v. Robbins, 466 U.S. 364 (8th Cir. 1984). This is a significant difference from Canadian law, which has strictly curtailed recourse to the courts for resolution of collective agreement disputes; see St. Anne Nackawic Pulp & Paper Co. v. Canadian Paper Workers Union, Local 219, [1986] 1 S.C.R 704. A useful review of the development of § 301 is found in Adell, supra, at pp. 125-35.
This brief overview of American legislation suggests a legal setting for the negotiation of retirement benefits that is different, but not entirely distinct, from our own. Canadian labour law does not recognize the distinction between mandatory and permissive subjects of bargaining, but this does not directly impact on the vesting of retirement benefits. Canadian jurisdictions do not provide for an explicit dichotomy between pension and welfare benefits for retirees, but provincial pensions legislation, to varying degrees, protects the vested nature of pension plans; see, for example, Pension Benefits Act, R.S.O. 1990, c. P.8, ss. 10, 35-38, 75. To my knowledge there is no equivalent legislative protection for welfare benefits, thus mirroring the American position. As discussed above, the remedial differences with respect to access to the courts is significant, and may differentiate the nature and scope of vested benefits in the two countries. However, even this difference does not impair the underlying concept of vesting in Canada.
I turn now to a review of the American cases, keeping the legislative provisions outlined above in mind. An appropriate starting point is John Wiley & Sons v. Livingston, to which I have already referred in the context of vested rights in general. Wiley is not a retirement benefits case, but it does establish the concept of accrued rights surviving the expiry of a collective agreement. In Wiley, a unionized company (Interscience) merged with a larger non-union company (Wiley), which had the effect of terminating the collective agreement at Interscience. The union claimed that certain rights under that collective agreement survived its expiry -- questions of seniority status, severance pay, etc. The union argued that in the new union-free entity, certain rights negotiated under the old agreement remained "vested" in the Interscience employees. The company challenged the arbitrability of the dispute, and the union sued under § 301 of the LMRA to compel arbitration. The U.S. Supreme Court took note of the limited nature of the union's action. It stated, at p. 551: "This Union does not assert that it has any bargaining rights independent of the Interscience agreement; it seeks to arbitrate claims based on that agreement, now expired, not to negotiate a new agreement" (emphasis added). Writing for the court, Harlan J. commented on the action in this way, at pp. 554‑5:
It is true that the Union has framed its issues to claim rights not only "now" -- after the merger but during the term of the agreement -- but also after the agreement expired by its terms. Claimed rights during the term of the agreement, at least, are unquestionably within the arbitration clause; we do not understand Wiley to urge that the Union's claims to all such rights have become moot by reason of the expiration of the agreement. [Wiley apparently conceded the possibility that a right to severance pay might accrue before the expiration of the contract but be payable "at some future date"]. As to claimed rights [after expiry], it is reasonable to read the claims as based solely on the Union's construction of the Interscience agreement in such a way that, had there been no merger, Interscience would have been required to discharge certain obligations notwithstanding the expiration of the agreement. We see no reason why parties could not if they so chose agree to the accrual of rights during the term of an agreement and their realization after the agreement had expired. . . .
Whether or not the Union's demands have merit will be determined by the arbitrator in light of the fully developed facts. It is sufficient for present purposes that the demands are not so plainly unreasonable that the subject matter of the dispute must be regarded as non-arbitrable because it can be seen in advance that no award to the Union could receive judicial sanction.
Wiley, then, confirmed the proposition that certain rights in a collective agreement could accrue and be realized after the expiration of the agreement.
A second U.S. Supreme Court decision should be considered before assessing the Yard-Man cases. This is Pittsburgh Plate Glass Co., supra, which considered the relationship between active and retired employees. In that case, a collective agreement provided certain health insurance benefits for retired workers. The company wanted to alter these benefits, and made a proposal directly to the retired employees. The union filed unfair labour practice charges, alleging that the company was required to bargain only with the union over these benefits. The Supreme Court rejected these allegations, by ruling that retirement benefits are not a mandatory subject of bargaining. As I have noted, the duty to bargain in good faith in the United States extends only to "mandatory subjects of collective bargaining" under the NLRA. Thus the company did not breach its obligations to the union by bargaining with the retirees individually. The court rejected arguments that retirement benefits were merely deferred compensation for active employees, which would have triggered the duty to bargain in good faith. The reasoning of Brennan J. on this last point is important in understanding the American view of the status of retired workers. He stated at p. 181:
Having once found it advantageous to bargain for improvements in pensioners' benefits, active workers are not forever thereafter bound to that view or obliged to negotiate in behalf of retirees again. To the contrary, they are free to decide, for example, that current income is preferable to greater certainty in their own retirement benefits or, indeed, to their retirement benefits altogether. By advancing pensioners' interests now, active employees, therefore, have no assurance that they will be the beneficiaries of similar representation when they retire. [Emphasis added.]
I have highlighted the distinction between active and retired workers, as this would appear to go to the heart of the court's decision. Under American law, it seems, the focus of the analysis is on the date of retirement. Before this time, the active employee is completely at the mercy of the collective bargaining process. He or she might work a lifetime on the premise that retirement benefits will be forthcoming, yet be deprived of those rights if they are bargained away in reaching the collective agreement under which he or she retires. This may seem harsh, but it is of the essence of the collective bargaining process. As a member of the bargaining unit, the employee is in a position to influence the course of bargaining, and thus ensure that the bargaining agent does not consent to the expropriation of a lifetime of foregone income which has been sacrificed in return for the promise of retirement benefits. But the position of retired employees is different, a point which Brennan J. emphasized in a footnote to the passage quoted above:
Since retirees are not members of the bargaining unit, the bargaining agent is under no statutory duty to represent them in negotiations with the employer. . . .
This does not mean that when a union bargains for retirees -- which nothing in this opinion precludes if the employer agrees -- the retirees are without protection. Under established contract principles, vested retirement rights may not be altered without the pensioner's consent. . . . The retiree, moreover, would have a federal remedy under § 301 of the Labor Management Relations Act for breach of contract if his benefits were unilaterally changed.
In sum, the union is free to bargain on behalf of retired employees to increase welfare benefits for retired workers, but any bargaining that decreases such benefits would be at the peril of both the employer and the union. The retirees would have a range of options for redress. If the benefits had been reduced unilaterally by the employer, then the retirees would prevail upon the union to grieve the reduction on their behalf under the collective agreement under which the benefits had vested. Alternatively the retirees could sue the employer without resorting first to the arbitration process; see Anderson v. Alpha Portland Industries, Inc., supra. The union may have been a willing party to the reduction in retirement benefits, by trading off retirement benefits for higher current wages. In that case the retirees could pursue an unfair representation charge against the union, and could also sue both the employer and the union under § 301. Given this range of remedies, retirement rights in the United States can vest in the strongest sense of that term. The development of the American conception of vested rights is traced by Adell, supra, at pp. 135-40.
I turn, then, to the spate of decisions in the past decade on the very issue with which we are here concerned. As I have noted, the leading decision is the Yard-Man case, although the issue was considered in earlier cases: see Turner v. Teamsters, 604 F.2d 1219 (9th Cir. 1979). The facts in U.A.W. v. Yard‑Man, Inc., supra, are typical of these cases, and are quite similar to those in the present case. There, a plant closing prompted the termination of a collective agreement, and the company advised retirees that life and health insurance benefits would be cut off at that time. The collective agreement purportedly promised that these benefits would continue beyond the term of the collective agreement, and the union sued under § 301 on behalf of the retirees, seeking specific performance of that purported obligation.
The Sixth Circuit Court of Appeals reviewed the case law stemming from Wiley, citing it as authority for the proposition that parties to a collective agreement can contract for rights that extend beyond the term of a collective agreement. Whether such vesting had in fact occurred would depend, of course, on the intent of the parties, and the court found that many of the basic principles of contractual interpretation are appropriate for discerning such intent. As such, the court established the following approach for determining whether retirement benefits have vested. It suggested that courts should look first to the disputed language in the collective agreement, interpreting each provision as part of an integrated whole. If ambiguities exist, courts should then look to other provisions of the agreement, and to the context in which the agreement was negotiated. Finally, the interpretation of the agreement should be consonant with federal labour policy.
Applying this approach, the court concluded that the clause before them respecting retirement benefits was ambiguous as to vesting. The clause read as follows: "The Company will provide insurance benefits equal to the active group benefits . . . for the former employee and his spouse." The agreement did not explicitly contemplate the eventuality of the termination of the collective agreement, and as such was unclear on whether retirees' rights would survive that event. Accordingly, the court reviewed other provisions of the agreement, finding several instances in which the text was indicative of an intent to vest retirement benefits. Finally, it considered the context in which the benefits were negotiated, reasoning as follows, at p. 1482:
Finally, examination of the context in which these benefits arose demonstrates the likelihood that continuing insurance benefits for retirees were intended. Benefits for retirees are only permissive not mandatory subjects of collective bargaining . . . . As such, it is unlikely that such benefits, which are typically understood as a form of delayed compensation or reward for past services, would be left to the contingencies of future negotiations. . . . The employees are presumably aware that the union owes no obligation to bargain for continued benefits for retirees. If they forego wages now in expectation of retiree benefits, they would want assurance that once they retire they will continue to receive such benefits regardless of the bargain reached in subsequent agreements. Contrary to Yard-Man's assertions, the finding of an intent to create interminable rights to retiree insurance benefits in the absence of explicit language, is not, in any discernible way, inconsistent with federal labor law.
Further, retiree benefits are in a sense "status" benefits which, as such, carry with them an inference that they continue so long as the prerequisite status is maintained. Thus, when the parties contract for benefits which accrue upon achievement of retiree status, there is an inference that the parties likely intended those benefits to continue as long as the beneficiary remains a retiree. This is not to say that retiree insurance benefits are necessarily interminable by their nature. Nor does any federal labor policy identified to this Court presumptively favor the finding of interminable rights to retiree insurance benefits when the collective bargaining agreement is silent. Rather, as part of the context from which the collective bargaining agreement arose, the nature of such benefits simply provides another inference of intent. Standing alone, this factor would be insufficient to find an intent to create interminable benefits. In the present case, however, this contextual factor buttresses the already sufficient evidence of such intent in the language of this agreement itself.
In the result, the court granted specific performance, ordering the company to continue to pay retirement benefits to its former employees.
The central proposition of Yard-Man, that parties to a collective agreement can provide for "interminable" retirement benefits, has not since been challenged in the numerous cases that have considered it. The approach was immediately followed in Bower v. Bunker Hill Co., 725 F.2d 1221 (9th Cir. 1984), at p. 1222, and in U.A.W. v. Cadillac Malleable Iron Co., 728 F.2d 807 (6th Cir. 1984), at p. 808. In Cadillac the Sixth Circuit clarified that the inference of an intention to vest benefits does not reverse the onus of proof, which remains with the union as the party asserting that benefits have vested. The Eighth Circuit, while accepting the concept that retirement benefits can vest, has rejected the notion that an inference of vesting arises from the fact that such rights are "status benefits"; see Anderson v. Alpha Portland Industries, Inc., 836 F.2d 1512 (8th Cir. 1988), certiorari denied 489 U.S. 1051; and see United Food and Commercial Workers Int'l Union v. Dubuque Packing Co., supra, at p. 70. The split between the Sixth and Eighth circuits was considered in United Paperworkers v. Champion International Corp., 908 F.2d 1252 (5th Cir. 1990), where the court observed, at p. 1261, that at a minimum the cases agree that vesting of benefits can take place if the collective agreement so provides. It put it:
In none of these cases did the court assume as a general principle of law that the termination of a collective bargaining agreement terminates the retirement benefits conferred by that agreement. In each case the court looked to the specific agreement in question to discern whether there was an intent to confer lifetime health insurance benefits on the covered retirees.
As to the disputed point, the court concluded in a footnote at pp. 1261-62 as follows:
To the extent that Yard-Man held that there is, as a general proposition, an inference of an intent to vest retirement benefits (because they are "status" benefits), we find merit in the Eighth Circuit's criticism in Anderson of this aspect of Yard-Man and find no basis in logic or federal labor policy for such a broad inference. However, we note that this would not prevent the district court from considering, as some evidence of intent, for example, the fact that retirees have no voice in negotiating a new collective bargaining agreement, a fact of quite general applicability to cases where the vesting of retirement benefits is at issue. In other words, this matter must be determined on a contract-by-contract basis.
Thus, the Fifth Circuit stakes out a compromise position. But other courts appear to endorse the inferential approach; see Keffer v. H. K. Porter Co., 872 F.2d 60 (4th Cir. 1989). Recent decisions continue to endorse the basic propositions of Yard-Man: United Steelworkers of America v. Connors Steel Co., 855 F.2d 1499 (11th Cir. 1988); Ryan v. Chromalloy American Corp., 877 F.2d 598 (7th Cir. 1989). An apparently contradictory decision from the Seventh Circuit, Merk v. Jewel Companies, Inc., 848 F.2d 761 (7th Cir. 1988), in fact deals with a different issue, whether employees who retire in the midst of collective bargaining can complain about a reduction in benefits in the agreement under negotiation when they retired.
In argument before this Court, the company branded the Yard-Man cases as a divergent strand of jurisprudence emerging solely from the Sixth Circuit. However, as the cases applying Yard-Man reveal, the decision has gained general acceptance across the United States, and any differences have been confined to a debate over how to ascertain the intent of the parties. Moreover, these cases are entirely consistent with the earlier Supreme Court authorities supporting the concept of vested rights for retirees. Taken as a whole, I find the American jurisprudence to be highly persuasive of the approach this Court should adopt. The American courts have properly focused on the time of retirement as the moment at which certain rights granted under a collective agreement vest. While distinctions can be drawn with respect to the enforceability of the right in Canada, such distinctions, in my view, have no bearing on the present appeal.
(b) The Law in Canada
The status of retirement benefits has received comparatively little attention by Canadian courts and labour tribunals, and there is almost no case law on the status of retired workers under Canadian collective bargaining regimes. A useful starting point, and a case that can be considered the leading Canadian authority on the question, is the decision of the British Columbia Labour Relations Board in Canadian Paperworkers Union v. Pulp and Paper Industrial Relations Bureau (1977), 77 C.L.L.C. 675. Unfortunately, the decision has not been widely reported, was not cited in argument before this Court, and was apparently not considered by the courts below. At issue in the case was the question of whether unions could legitimately bargain on behalf of retired workers. The board analyzed this issue in an admirably comprehensive fashion, drawing on the then emergent American case law in the area.
In that case, the employer had refused to bargain on improvements to retirees' pension rights, claiming that the union was not legally entitled to bargain on behalf of the retirees on this issue. The union complained to the Labour Relations Board, alleging bad faith bargaining by the employer, contrary to British Columbia's Labour Code, S.B.C. 1973 (2nd), c. 122. The complaint was ultimately dismissed. The board found that the duty to bargain in good faith does not attach to specific issues (although the refusal to bargain on any one issue was evidence going to overall conduct contravening the global duty to bargain in good faith). The board commenced its reasons by expressing disbelief at the position taken by the employer, citing evidence, at p. 678, of "a widespread practice of negotiating the issue in major collective bargaining relationships right across North America." The employer, however, adopted the position that this "widespread practice" was merely permissive bargaining, and that employers could not be compelled to bargain on the issue. The employer thus advocated adoption of the American distinction between mandatory and permissive subjects of bargaining, citing Pittsburgh Plate Glass Co., supra, in support. However, the board rejected this dichotomy, commenting as follows at p. 690 and at p. 691:
In our judgment, it is inconsistent with the objectives of the B.C. Labour Code to start this Board down that path of overseeing, even to this limited extent, substantive discussions of the parties at the bargaining table.
. . .
The legal duty to bargain imposed by the Labour Code is a single, global obligation to negotiate a settlement of an entire collective agreement.
In rejecting the dichotomy, the board thereby had no option but to dismiss the union's claim of bad faith bargaining, as the union (at p. 679) "assumes that the legal duty to bargain attaches to particular topics which one party wants to place on the bargaining agenda", a proposition the board found to be "hardly tenable." In the course of reaching these conclusions, the board considered several issues touching on retired employees and the status of their benefits, the very questions at issue in the present case.
First, the board declined to rule on whether retired workers could be "employees" under the Code, finding it unnecessary to resolve that question. However, its comments on this subject suggest that it was of the view that the term "employee" could be expansively interpreted to include retired workers. The board did not need to decide the question, as it found that nothing in the Labour Code prohibited parties agreeing to provisions having an effect on persons not within the statutory term of "employee". In other words, unions can bargain on behalf of non-employees, including retired workers. The next issue considered by the board, which is of particular significance for the present case, was the question of vesting of retirement benefits. The employer had argued that retirement rights vested in the retired employee, thus disentitling the union to bargain over these benefits. The board responded in this way at p. 682:
True, the normal legal expectation is that pension benefits are vested as of a certain point in time; and that upon retirement a pensioner has a legal entitlement to his pension which cannot be touched by collective bargaining between a union and an employer. But that would appear to be the product of the typical legal arrangements for pension plans: which require the payment of the employer (and any employee) contribution into a pension trust, which in turn guarantees pension of a certain amount to retirees as beneficiaries under the trust. But the legal situation is not so clear for other kinds of contract benefits. For example, suppose a collective agreement has extended a prescription drug plan to retirees. If a government program has made that benefit redundant, and the parties want to eliminate it and put the money elsewhere, presumably they would be entitled to do so, even in respect of retirees. Undoubtedly, they would be authorized to do so . . . if they built that condition into the contract benefit right from the outset. The reason is that these benefits rest on the private collective agreement and, in the final analysis, the parties who negotiated the contract which created the benefit can also reserve to themselves the authority either to modify or to terminate the benefit. Thus if the parties to a pension plan agreement anticipate this problem, and write into their trust document their mutual authority to alter the level of benefits, one way or the other, then the legal result is that these benefits are no longer absolutely vested in the retiree.
. . .
In any event, suppose it were true that a union could not reduce pension benefits for retirees. The union's response might well be "So what?" The parties are still perfectly capable of bargaining for an increase in the benefits. Nor is it unheard of to find collective bargaining about an issue which has a statutory floor. . . . [Emphasis in original.]
In this comparison of pension benefits with welfare benefits for retirees, the board reached the conclusion that these benefits had an equivalent legal status as to vesting. Both could vest, depending upon the terms by which the benefit was created. Moreover, the only manner in which the benefits could be divested would be if the parties had anticipated this problem at the outset, and provided for such divesting in the terms by which the benefit is promised. This position would appear to be exactly the same as that adopted in the American cases.
Shortly after its decision in Canadian Paperworkers, the board returned to the question it had declined to answer there; i.e., the status of retirees as "employees" under the Labour Code. In Cominco Pensioners Union and Cominco Ltd., [1979] 2 Can. L.R.B.R. 322, the board refused to certify a group of retired workers as a bargaining unit, finding that retired workers were not "employees" under the Act. The board commented at p. 329:
How does the situation of the retired worker compare to the common conception of an employee? The fact is that practically all elements of the usual employer-employee relationship are missing in the case of retired workers. As retirees, they are not paid a wage in return for current service; they are not required to perform any tasks assigned by an employer for his benefit; they are no longer subject to control or direction by the employer; and they are wholly unconcerned about such things as promotion, discipline and discharge. In short, once an employee has retired, all obligations to the employer come to an end. Conversely, for the most part, the employer's obligations end as well. There are, perhaps, a couple of exceptions: first, the employer must comply with pension arrangements or other benefits which are guaranteed by contract; secondly, recently retired workers may be entitled to a retroactive wage payment upon the execution of a new collective agreement. . . . [Emphasis added.]
In the board's view, even though retirees were no longer part of the collective bargaining process, the employer's contractual obligations to retirees continued. This position is identical to that found in the United States cases.
One additional decision should be referred to in this context, the arbitration ruling in Re Coulter Manufacturing Ltd. (1972), 1 L.A.C. (2d) 426. The facts of that case are somewhat similar to those before us. There the company announced plans to phase out its operations, and, during the currency of the collective agreement, discontinued insurance benefits for retired workers. The union filed a grievance on behalf of the retired workers prior to the expiration of the agreement. As such, the case differs from the present appeal, as the employer there could not argue that the agreement had expired before the grievance was laid. However, the employer did argue that as retirees were not "employees" as defined in the collective agreement, the retirees could not benefit from the agreement, and any reference to retirees was merely (at p. 427) a "gratuitous statement of company policy." The arbitrator rejected this distinction, ruling as follows, at pp. 428-29:
Clearly, the retired employees are not employees within the strict meaning of that term. The same may of course be said of employees who are laid off for any substantial period of time. In each case, however, the question is not whether or not such a person is an employee within the strict meaning of the term (obviously he is not), but rather what are the rights which such person may have pursuant to the collective agreement. That is, the collective agreement has provided certain benefits for persons who are not in fact members of the bargaining unit at the time they seek to exercise such benefits . . . . While it may be that a question might arise as to the entitlement of a person who is no longer in the employ of the company in the strict sense of the term to avail himself of the grievance and arbitration provisions of the collective agreement . . . the trade union party to the collective agreement may certainly seek to enforce such rights on behalf of the persons entitled thereto. . . . If this were not so, then the benefits won by the union in negotiation and agreed to by the company would be illusory.
In the result, the arbitrator ordered the employer to reinstate the retirement benefits, but only for the remaining term of the collective agreement. He ruled that the union had not established that the agreement contemplated the survival of retirement benefits beyond the expiration of the agreement itself. These findings are in complete accord with the Canadian Paperworkers decision, and with the American position.
This would appear to be the extent of the Canadian case law on point, but it does reveal a substantial similarity to the American approach to retirement benefits, despite the different legislative settings. In both countries, retired workers fall outside the bargaining unit and are thereby excluded from the collective bargaining process. In both countries, statutory vesting protections have been extended to pension plans, but not welfare plans. As in the United States, Canadian law would appear to leave the question of vested welfare benefits to be determined by the contracting parties. While the retirees are outside the collective bargaining process, unions can (and frequently do) bargain on behalf of retired workers. The United States classifies such bargaining as permissive, and the employer can refuse to discuss the question. The concept of permissive subjects of bargaining has not been adopted in Canada, but this does not affect the status of vesting. However, it was on this point that the company rested its distinction of the American cases, and I turn now to these submissions.
As I understand the company's argument, it is this: once retirees' rights have been recognized in an American collective agreement, the permissive nature of those rights renders them immune from re-negotiation in the course of reaching a new agreement. That is, if an employer attempted to negotiate for a reduction in those benefits, the union could legitimately refuse to even discuss the issue. In my view, this submission is both inaccurate and self-defeating. First, the submission overlooks the fact that ongoing bargaining over mandatory and permissive subjects affects only the prospective relationship between the parties -- it cannot affect vested rights. It may be that from a procedural point of view retirees' benefits are paid on the basis of the arrangements in the current collective agreement, and as we have seen the parties are free to increase such benefits in their ongoing bargaining. But the retirees' substantive rights are found in the old collective agreement, and are left untouched by the ongoing bargaining between the parties. If anything, the permissive nature of retirement benefits precludes their entrenchment in ongoing bargaining -- the employer can refuse to include any benefit in the current agreement, even though past agreements promise such rights. Current retirees would then lose their accrued pension benefits altogether; but the benefits of those who retired under prior collective agreements would remain untouched. Moreover, the company's argument impliedly concedes that retirement rights survive the expiration of an agreement, albeit only to be negotiated away during the next round of collective bargaining. The latter point is inaccurate, but even if it were true the result would support the union's claims in the present case. That is, under the company's approach the benefits in question would survive the expiration of the last collective agreement, pending future bargaining. But there was no such future bargain -- the shutdown agreement is silent on retiree's benefits. As such, even accepting the company's thesis, it fails to carry the day.
But in my view the company's submissions are flawed. As I see it, both Canadian and American retirees enjoy a form of vesting considerably stronger than that argued by the company. Specifically, the company's distinction based on the American notion of retirement benefits as a permissive subject of bargaining is largely irrelevant to the status of vesting of retirees' benefits. Vesting is determined by the contractual agreement between the parties, not the subsequent bargaining between them. It may well be easier for an American union to disassociate itself from an employer's attempt to strip away vested retirement benefits. The union can refuse to bargain on that permissive subject, and indeed in some contexts the union could insist upon retirees having independent representation before agreeing to a collective agreement purporting to divest benefits; see Century Brass Products, Inc. v. U.A.W., 795 F.2d 265 (2nd Cir. 1986). But this advantage is, in practical terms, slight. Vested rights are protected by the right to grieve the expired collective agreement, not by control over the subsequent bargaining process. In any event the right to refuse to bargain on an issue is somewhat illusory, as the other party can insist on bargaining on a permissive subject so long as it is not the sole cause of a bargaining impasse; see Philip Carey Mfg. Co. v. N.L.R.B., 331 F.2d 720 (6th Cir. 1964), certiorari denied, 379 U.S. 888 (1964).
The practical insignificance of the American dichotomy to the question of vesting was noted in the Canadian Paperworkers decision, supra. After discussing the question of whether such benefits were a "mandatory" or "permissive" subject for bargaining, the board commented as follows, at pp. 679-80:
Our second observation is that the choice between these two legal characterizations of the issue of retiree pensions may not make that much practical difference in the long run. . . . [The union] admits that even if the [employer] is bound to bargain about the subject, it certainly is not required to agree. The [employer] could listen politely to the proposals made by the [union] and say: we are sorry but it is a matter of principle with us that this subject should not be part of the collective agreement, and we are not prepared to pursue the matter further. In that case, the [union] admits that it could not lodge a valid complaint with the Labour Board and instead would have to take strike action to try to change the [employer's] mind. Here the [employer] would respond with the proposition that the Union could not strike solely about such a "permissive" issue in negotiation. But again the [employer] admits that an astute union could easily save one or two "mandatory" items, strike about all of them, and agree only to a memorandum of settlement which has acceptable terms on each of the items, retiree benefits included.
The board thus concluded that "the legal label might not ultimately make that much practical difference". However, as noted earlier, the board explicitly declined to adopt the American dichotomy.
The company argues that the permissive nature of retirement benefits was a key feature of the reasoning of the Sixth Circuit Court of Appeals in Yard-Man. However, as the excerpts cited earlier reveal, the fact that retirement benefits are permissive subjects for bargaining was referred to by the court as a mere contextual factor to aid in the interpretation of the collective agreement. The court's point was simply that one could infer an intention to vest benefits, as the retirees would not have wanted their benefits to depend upon the goodwill of the parties during future collective bargaining. That is, if retirement benefits had not been promised in a vested form, then the retirees' ongoing benefits would have been dependant upon each successive agreement containing the promise to pay all retirees' benefits for the term of that collective agreement, and this uncertainty would have been unacceptable to the retiring workers. It seems to me that the same argument can be made in Canada: it has little to do with the dichotomy between permissive and mandatory subjects, and has everything to do with the realities of collective bargaining in both countries. As we have seen, this "inferred" intention to vest has been the most controversial element of the Yard-Man case. However, it seems to me that such an inference, as one measure of the context in which bargaining took place between the parties, is a useful tool that can be employed by arbitrators in Canada on a case-by-case basis. In that respect, I would endorse the middle-of-the-road approach suggested by the Fifth Circuit in Champion International Corp., supra.
I turn now to the one area in which there may be a crucial difference in the nature (but not the existence) of vested retirement benefits in Ontario as compared to the United States. This is the range of remedial choices available to individual retired workers. In the United States there is an independent right to sue in a court of law when benefits promised in a collective agreement are withdrawn, even if that withdrawal occurs pursuant to a new collective agreement between management and labour. As well, retired workers, although no longer part of the bargaining unit, can bring an unfair representation complaint against a union that fails to consider the interests of retired workers during the course of bargaining. In Canada, it is unclear whether either of these routes is open to retired workers, who may be completely reliant upon their former bargaining agent to bring a grievance on their behalf when an employer unilaterally revokes vested benefits. And the grievance route may be foreclosed, as the union may be unwilling to grieve the issue on behalf of the retirees. This may arise because of an inevitable conflict of interest facing the union. If it were successful in grieving under an old collective agreement on behalf of retired workers, the employer would face increased overall labour costs, perhaps leading to harder bargaining over current employees' compensation. The union may well be reluctant to carry forward a grievance on behalf of retirees, as success on that front might well be contrary to the interests of current members of the bargaining unit.
In these circumstances, Canadian retirees may well find themselves in possession of a right without a remedy. The grievance procedure may be foreclosed, as described above. Retirees may not be entitled to bring a claim against the union for unfair representation, as such rights in Ontario appear to be limited to current members of the bargaining unit: see s. 68 of the Act. Finally, Ontario's Rights of Labour Act, R.S.O. 1980, c. 456, s. 3(3), and like provisions in other jurisdictions, may foreclose the possibility of a court action by the retirees; see Adams, Canadian Labour Law (2nd ed. 1993), at §§ 7.40-7.90. This problem does not arise in this case, as the union here did pursue a grievance on behalf of the retired workers. But in another case it seems to me that such a remedial vacuum, arising because the retirees are not party to the arbitration procedures guaranteed by the Act, may possibly be justification for allowing a court action to proceed; see St.-Anne Nackawic Pulp Co. & Paper v. Canadian Paper Workers Union, Local 219 (1982), 142 D.L.R. (3d) 678 (N.B.C.A.), at p. 686 and at p. 691; and see [1986] 1 S.C.R. 704, at p. 713 and at p. 721. Indeed, counsel for the company submitted that a court action was not only possible, but that the courts were the only forum available to these retirees. But this submission was made in passing, and was not developed in argument. As such I do not propose to go into the issue, except to say that it would appear to be irrelevant in this case. Assuming a court action is available, I know of no reason or authority that would preclude arbitration as an alternative forum for the retirees.
There may, as well, be other means by which retirees could surmount the remedial roadblocks that appear to face them. The term "employee" in the Act may well encompass retired workers in some contexts, thereby allowing retirees to take advantage of the Act's fair representation provisions. Finally, there is a possibility that the relationship between retired members of a bargaining unit and the bargaining agent for that unit is fiduciary in nature. If a union failed to consider the interests of retirees during collective bargaining, or refused to process a grievance on behalf of those retirees, such conduct might form the basis of a claim for breach of fiduciary duty.
To summarize, I am of the view that retirement rights can, if contemplated by the terms of a collective agreement, survive the expiration of that agreement. Moreover, although it is not strictly necessary to decide the point in this appeal, I would also find that these surviving rights vest at the time of retirement, and would survive subsequent collective bargaining that purported to divest such rights. As such, I have concluded that the arbitrator's general propositions in this respect were correctly stated, and the arbitrator had jurisdiction to hear the union's grievance. Of course, I make no comment on whether the terms of the agreement between the company and the union do in fact create such a vested right. That is a question for the arbitrator to decide when the arbitration hearing proceeds on the merits.
The Cross-Appeal
The union sought to cross-appeal that portion of the Court of Appeal's order directing that the arbitration proceed before a different arbitrator. That order was made at the request of the company, and in the belief that the arbitrator had in effect pre-judged the merits of the case in the course of determining his jurisdiction. In written submissions, the company argued that the cross-appeal should be rejected because the union did not seek leave to cross-appeal, as required by s. 29(2) of the Rules of the Supreme Court of Canada, SOR/83-74, as am. by SOR/88-247. Moreover, the company stands by the merits of the decision of the court below, arguing that the present arbitrator is biased with respect to the merits of the arbitration and should not be allowed to continue. The cross-appeal was not argued during oral submissions to this Court, and in the absence of on order granting leave to cross-appeal the issue was not properly before us. As such, without commenting on the merits of the issue, it is not open to me to consider the cross-appeal.
Disposition
I would dismiss the appeal with costs in this Court and in the courts below. I would also dismiss the cross-appeal with costs.
//Cory J.//
The following are the reasons delivered by
Cory J. -- I am in substantial agreement with the excellent reasons of Justice La Forest and would dispose of the appeal in the same manner that he has suggested. To some degree we differ on the approach that should be taken by the courts in reviewing the decisions of boards, tribunals and arbitrators acting in the field of labour relations.
This appeal arises from a difference of opinion between labour and management as to the nature and extent of pension rights of former employees. The union supports the position of the former employees and management takes a contrary view.
Unresolved disputes fester and spread the infection of discontent. They cry out for resolution. Disputes in the field of labour relations are particularly sensitive. Work is an essential ingredient in the lives of most Canadians. Labour disputes deal with a wide variety of work related problems. They pertain to wages and benefits, to working conditions, hours of work, overtime, job classification and seniority. Many of the issues are emotional and volatile. If these disputes are not resolved quickly and finally they can lead to frustration, hostility and violence. Both the members of the work force and management have every right to expect that their differences will be, as they should, settled expeditiously. Further, the provision of goods and services in our complex society can be seriously disrupted by long running labour disputes and strikes. Thus society as a whole, as well as the parties, has an interest in their prompt resolution.
Legislators have recognized the importance of speedy determination of labour disputes. By the enactment of labour codes they have sought to provide a mechanism for a fair, just and speedy conclusion of the issues. The legislators have gone further and attempted to insulate the decisions of the various labour boards, tribunals and arbitrators from review by the courts. In earlier times, the courts resisted legislative attempts to restrict their ability to review the decisions of various labour boards. However, over a period of time they have accepted the vital importance of labour tribunals and adopted a more restrained approach in reviewing their decisions.
The Basis for the Courts' Review of a Decision of a Labour Tribunal or Arbitrator
Despite the recognition of the importance and reliability of the decisions of labour boards and arbitrators, the courts must retain the ability to review their decisions. In broad terms the review can be founded on any one of the following bases:
(1) if, during the course of its proceedings, the tribunal has failed to provide procedural fairness the court may intervene;
(2) if the tribunal exceeded the bounds of the jurisdiction conferred upon it by its enabling legislation intervention by the court will be appropriate;
(3) if the tribunal acted within the purview of its enabling legislation but rendered a decision that is patently unreasonable the court may intervene.
In this case there is no suggestion that there was any lack of procedural fairness. Rather the issue on this appeal is whether the arbitrator acted within the bounds of jurisdiction conferred upon him by the empowering legislation.
An arbitrator must be correct in his or her decision as to whether or not he or she had jurisdiction to resolve the question before him or her. If the arbitrator erred then the court must intervene. The manner in which the courts should approach this question is set out in U.E.S., Local 298 v. Bibeault, [1988] 2 S.C.R. 1048. There it was explained that the court must review a number of factors in determining the standard of deference to be accorded to an administrative decision maker. At page 1088 Beetz J. wrote:
. . . 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 reasons for its existence, the area of expertise of its members and the nature of the problem before the tribunal.
Did the Arbitrator Act Within the Bounds of the Jurisdiction Conferred upon Him by his Enabling Statute?
In this case, the appellant objected to the grievance brought by the union. It took the position that there was no longer a collective bargaining agreement in place when the grievance was launched. It was contended that in the absence of a current collective agreement there was no other basis upon which the employer's obligation could be based. In the absence of a current collective agreement dealing with the pension issue, it was said that the arbitrator had no jurisdiction to consider the question. It was on this initial objection of the appellant's that the arbitrator had to rule.
There can be no question that the appellant's objection required the arbitrator to address the issue raised on this appeal. Namely, did he have jurisdiction to consider the rights of retired workers which arose from a collective bargaining agreement that had expired. Since the objection questioned the arbitrator's jurisdiction his ruling with regard to it had to be correct. I agree with La Forest J. that in this case the arbitrator was correct in concluding that he had jurisdiction to deal with the question put to him.
The Approach that Should be Taken to the Decision of the Tribunal or Arbitrator on the Merits.
This case turns on the issue of whether the arbitrator had jurisdiction to consider the pension question that was put before him. It is therefore not necessary for the resolution of this appeal to consider the standard of review by the courts of an arbitrator's decision on the merits. However, this matter has been considered at length by my colleague La Forest J. and it is for that reason that I will make the following very brief remarks concerning that issue.
Once it has been determined that a tribunal was correct in concluding that the issue to be decided was properly before it according to its enabling legislation, then a court can only intervene if the decision reached was patently unreasonable. It was in Canadian Union of Public Employees, Local 963 v. New Brunswick Liquor Corp., [1979] 2 S.C.R. 227 ("CUPE") that this high standard of curial deference to decisions of labour tribunals was established. Since then it has always been maintained by this court.
Further, that same deference has been accorded not only to labour tribunals and boards but also to arbitrators acting in the same field. In Volvo Canada Ltd. v. U.A.W., Local 720, [1980] 1 S.C.R. 178, it was held that the same high standard of curial deference should be applied to decisions of arbitrators. Pigeon J. writing for the majority (Martland, Ritchie, Beetz and Pratte JJ. concurring) summarized his position at p. 213 in these words:
. . . the question is not whether the construction reached is the correct one in the view of the Court, but whether it is one which the agreement would reasonably bear. In my view judged by this standard, the construction of the agreement adopted by the Arbitrator cannot be rejected.
He went on to say at p. 214:
On a grievance under a collective labour agreement, the grievor does not choose arbitration, he has no other remedy. The other party has no choice either but to submit to his obligation to allow the grievance to be arbitrated. On the other hand, the arbitration is not meant to be an additional step before the matter goes before the courts, the decision is meant to be final. It is therefore imperative that decisions on the construction of a collective agreement not be approached by asking how the Court would decide the point but by asking whether it is a "patently unreasonable" interpretation of the agreement. [Emphasis by underlining added.]
In Fraternité des policiers de la Communauté urbaine de Montréal Inc. v. Communauté urbaine de Montréal, [1985] 2 S.C.R. 74, Chouinard J., writing for the court, without citing CUPE, supra, emphasized the deference that should be given to an arbitrator's decision concerning a collective bargaining agreement. He relied, inter alia, on the reasons of Dickson J., as he then was, in Heustis v. New Brunswick Electric Power Commission, [1979] 2 S.C.R. 768. At pages 80-81 he wrote:
In Heustis . . . Dickson J. . . . wrote at pp. 781-82:
There is a very good policy reason for judicial restraint in fettering adjudicators in the exercise of remedial powers. The whole purpose in establishing a system of grievance adjudication under the Act is to secure prompt, final, and binding settlement of disputes arising out of interpretation or application of the collective agreement, or disciplinary action taken by the employer, all to the end that industrial peace may by maintained.
It is only where the decision of the arbitrator constitutes an abuse of power amounting to fraud and capable of producing a flagrant injustice that the courts may intervene in a case such as the one at bar.
It is particularly appropriate that this high standard of deference should be applied to administrative decisions made in the field of labour relations, whether they be made by tribunals, boards or arbitrators. In this volatile and sensitive field, the decision of either an arbitrator selected by the parties or of a labour board, which is often composed of representatives of both labour and management with wide experience in the field, should be final and binding unless the decision is indeed patently unreasonable.
My colleague in his reasons, has contrasted language such as "final and conclusive", which he would interpret as being privative and thus warranting deference, with "final and binding" which words he describes as having a "less privative effect". I cannot agree with this approach. To open the way to many and varied judicial interpretations of the words of any privative clause as to whether it was more or less privative in nature can do little but encourage a proliferation of litigation and interminably delay a final resolution. It would defeat the aim of the legislators who no matter what the words chosen, whether they be "final and binding" or "final and conclusive", were seeking to have the courts refrain from interfering with the decisions of the statutory labour boards or tribunals. Indeed, the speedy and final resolution of these disputes should be the paramount concern. That restraint would, of course, be subject to the right and obligation of the courts to review these decision on any of the three fundamental bases outlined earlier.
There is another aspect that should be recognized. It is not unusual for executives of a union who have no formal legal training to review decisions of tribunals, boards or arbitrators so that union members can be advised of the decision and whether it may be reviewed by the courts. Both the union executive, acting on behalf of the employee, and management should know the rules pertaining to court review. Those rules should be simple, straightforward and easy to follow.
The three basic grounds for judicial review provide protection for the parties from decisions made without jurisdiction, from patently unreasonable decisions and from failure to provide procedural fairness. Yet, as a general rule, they would allow the whole system for the resolution of labour disputes to function expeditiously, simply and as inexpensively as possible.
In the instant decision the arbitrator concluded that he had jurisdiction to deal with the issue but he did not deal with the merits. If he had, since he was correct in determining that he had acted within the scope of the jurisdiction conferred upon him by the statute, then it would have been necessary to determine whether his decision was patently unreasonable. Only had his decision been patently unreasonable could a court have intervened.
Disposition
The arbitrator was correct and acted within the powers conferred upon him by the enabling legislation when he concluded that he should consider the issue. In the result, like La Forest J, I would dismiss the appeal with costs in this court and in the courts below. I would also dismiss the cross-appeal with costs.
Appeal and cross‑appeal dismissed with costs.
Solicitors for the appellant: Blaney, McMurtry, Stapells, Toronto.
Solicitors for the respondents: Pollit, Arnold, MacLean, Toronto.