The Hospital Labour Disputes Arbitration Act (the “HLDAA”)dictates that disputes over collective agreements in Ontario hospitals and nursing homes have to be resolved by compulsory arbitration. The Minister of Labour appointed retired judges to chair arbitration boards. The Respondents, Canadian Union of Public Employees and Service Employees International Union, objected to the appointments on the basis that the retired judges lacked expertise, experience, tenure, and independence from government. The Appellant Minister of Labour in exercising his power of appointment under the HLDAA is required to be satisfied that the prospective chairpersons are not only independent and impartial but possess appropriate labour relations expertise and are recognised in the labour relations community as generally acceptable to both management and labour. The appropriate standard of review is patent unreasonableness. The majority found that the appointments were patently unreasonable because the Minister expressly excluded relevant factors that went to the heart of the legislative scheme.

Administrative law – Labour law – Arbitrators – Appointment – Bias – Ministerial powers – Judicial review – Statutory powers – Compliance with legislation – Standard of review – Patent unreasonableness

Canadian Union of Public Employees v. Ontario (Minister of Labour), [2003] S.C.J. No. 28, Supreme Court of Canada, May 16, 2003, McLachlin C.J. and Gonthier, Iaccobucci, Major, Bastarache, Binnie, Arbour, LeBel, and Deschamps JJ.

Since 1965, Ontario’s hospitals, nursing homes, and their employees have been required to resolve disputes over collective agreements by compulsory arbitration under the Hospital Labour Disputes Arbitration Act, R.S.O. 1990, c.H.14 (“HLDAA”). If the parties cannot agree on a mutually acceptable arbitrator, a panel of three members is struck, two designated by the parties and the third chosen by the two designates, or if they fail to agree, appointed by the Minister of Labour in accordance with s.6(5) of the HLDAA. The Labour Relations Act, 1995, S.O. 1995, c.1 provides in s.49(10) that the Minister may establish a list of approved arbitrators, and the normal practice was that the s.49(10) roster contained a list of arbitrators acceptable to management and the unions.

In early 1998, the Minister appointed four retired judges to chair several arbitration boards. These judges were not appointed by mutual agreement nor were they on the “agreed” list compiled under s.49(10). The unions claimed that the retired judges lacked expertise, experience, tenure and independence from government and sought a declaration that the Minister’s actions denied natural justice and lacked institutional independence and impartiality. The application for judicial review was dismissed by the Divisional Court. The Court of Appeal allowed the unions’ appeal, concluding that the Minister had created a reasonable apprehension of bias and interfered with the independence and impartiality of the arbitrators, as well as defeating the legitimate expectation of the unions contrary to the requirements of natural justice. The Minister was ordered not to make any further appointments “unless such appointments are made from the long-standing and established roster of experienced labour arbitrators” compiled under s.49(10) of the Labour Relations Act, 1995.

The Minister’s appeal to the Supreme Court of Canada was dismissed for reasons that differed somewhat from those of the Ontario Court of Appeal.

Per Gonthier, Iacobucci, Binnie, Arbour, LeBel and Deschamps JJ.: The Minister, as a matter of law, is required to exercise his power of appointment under s.6(5) of the HLDAA in a manner consistent with the purpose and objects of the statute that conferred the power. A fundamental purpose and object of the HLDAA was to provide an adequate substitute for strikes and lockouts. To achieve the statutory purpose, the Minister himself wrote that “the parties must perceive the system as neutral and credible”.

Although the s.6(5) power is expressed in broad terms, the legislation intended the Minister in making his selection to have regard to relevant labour relations expertise as well as independence, impartiality and general acceptability within the labour relations community. “General acceptance” does not mean that a particular candidate must be acceptable to all parties all the time; it only means that the candidate has a track record in labour relations and is seen in the labour relations community as widely acceptable to both unions and management by reason of his or her independence, neutrality and proven expertise.

However, s.6(5) of the HLDAA does not impose a procedural requirement on the Minister to consult with the parties to each arbitration nor did the evidence establish a firm practice of appointing from a list or by mutual agreement. A general, ambiguous promise to continue an existing system subject to reform does not suffice under the doctrine of legitimate expectation to bind the Minister’s exercise of his or her discretion.

While the Court of Appeal did not suggest that the retired judges were in fact biased or partial, it concluded that they might reasonably be seen to be “inimical to the interests of labour, at least in the eyes of the appellants (unions)”. However, the test is not directed to the subjective perspective of one of the parties, but to the reasonable detached and informed observers. A fully informed, reasonable person would not stigmatize retired judges as a class with an anti-labour bias. Allegations of individual bias must be dealt with on a case by case basis.

The appropriate standard of review is patent unreasonableness. The pragmatic and functional approach applies to the judicial review of the exercise of a ministerial discretion and factors such as the existence of a privative clause, the Minister’s expertise in labour relations, the nature of the question before the Minister and the wording of s.6(5) all call for considerable deference. A patently unreasonable appointment is one whose defect is immediate, obvious and so flawed in terms of implementing the legislative intent that no amount of curial deference can justify letting it stand.

The appointments were not patently unreasonable simply because the Minister did not restrict himself to the s.49(10) list of arbitrators. However, in assessing whether the appointments were patently unreasonable, the courts are entitled to have regard to the importance of factors the Minister excluded from his consideration. In this case, the Minister expressly excluded relevant factors that go to the heart of the legislative scheme. The matters before the boards required the familiarity and expertise of a labour arbitrator. Expertise and neutrality foster general acceptability. Appointment of an inexpert and inexperienced chairperson who is not seen as generally acceptable in the labour relations community is a defect in approach that is both immediate and obvious. Having regard to the legislative intent in the HLDAA, the Minister’s approach to the s.6(5) appointments was patently unreasonable. The appeal was thus dismissed on the limited ground that the appointments that excluded from consideration labour relations expertise and general acceptability in the labour relations community were patently unreasonable.

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