The Supreme Court of Canada allowed an appeal by appellant Nor-Man Regional Health Authority from the Manitoba Court of Appeal and determined that an arbitral award applying equitable remedies was not an aspect of the award that fell outside of the protected zone of deference. As a general rule, reasonableness was the standard of review governing arbitral awards under collective agreements. The arbitrator’s imposition of estoppel in this case was not unreasonable. The arbitrator’s decision that the union was barred from grieving the employer’s decision due to its long-standing acquiescence and the reasons given were transparent, intelligible and coherent. The appeal was allowed and the arbitrator’s award was restored.

Administrative law – Decisions of administrative tribunals – Labour and employment boards – Arbitration Board – Labour law – Arbitration – Collective agreements – Benefits – Judicial review – Standard of review – Reasonableness simpliciter – Correctness – Equitable remedies – Promissory estoppel

Nor-Man Regional Health Authority Inc. v. Manitoba Association of Health Care Professionals, [2011] S.C.J. No. 59, 2011 SCC 59, Supreme Court of Canada, December 2, 2011, McLachlin C.J. and LeBel, Deschamps, Fish, Abella, Rothstein and Cromwell JJ.

In July 2008, a casual employee of the Appellant Nor-Man Regional Health Authority (the “Employer”) filed a grievance that she was entitled to, upon 20 years of employment, to a bonus week of vacation pursuant to the terms of the collective agreement between the Employer and her union, the Respondent Manitoba Association of Health Care Professionals (the “Union”). Her grievance went to arbitration and the arbitrator endorsed the Union’s interpretation of the vacation benefit clauses in its collective agreement with the Employer but imposed an estoppel on the Union’s claim for redress. While the Employer’s practice of excluding casual service in calculating vacation benefits breached the terms of the collective agreement, the arbitrator decided that the Union was barred by its long-standing acquiescence from grieving the Employer’s application of the disputed vacation provisions. The Employer was entitled to assume that the Union had accepted its practice, and to rely on that acceptance in not seeking to negotiate a change to the employee’s employment status or change to the collective agreement.

The arbitrator’s award was upheld by the Manitoba Court of Queen’s Bench on judicial review but overturned by the Manitoba Court of Appeal, which concluded that the arbitrator had misconstrued the doctrine of promissory estoppel. The Court of Appeal held that promissory estoppel, as a matter of law, requires a finding that the promisor intended to affect its legal relations with the promise and, yet here, the arbitrator had only found that the promisor (the Union) ought to have known how the promisee (the Employer) was calculating employees’ vacation entitlements, and had made no finding as to the Union’s intent. In applying the legal doctrine of estoppel, the Court of Appeal held that the arbitrator must be correct and, since he was not, his decision was overturned. The Employer appealed the Court of Appeal’s Decision to the Supreme Court of Canada.

The Supreme Court unanimously allowed the appeal and restored the arbitrator’s decision. Mr. Justice Fish, in writing for the Court, held that the arbitrator acted reasonably in applying the doctrine of estoppel. The standard of review applicable in this case is governed by Dunsmuir v. New Brunswick, [2008] S.C.J. No. 9. Prevailing law clearly establishes that arbitral awards under a collective agreement are subject, as a general rule, to the reasonableness standard of review and an arbitrator’s imposition of an estoppel or an award that applies common law or equitable remedies is not an exception. An estoppel imposed as a remedy by an arbitrator in a grievance of a collective agreement is not an issue “that is both of central importance to the legal system as a whole and outside the adjudicator’s specialized area of expertise” within the meaning of Dunsmuir (para.60). It therefore cannot be said to fall within that category of question subject to review for correctness pursuant to Dunsmuir.

Furthermore, a contextual analysis confirms that reasonableness, not correctness, is the appropriate standard of review. Labour arbitrators are authorized by their broad statutory and contractual mandates, and well equipped by their expertise, to adapt the legal and equitable doctrines they find relevant within the sphere of arbitral creativity. They may properly develop doctrines and fashion remedies appropriate in their field, drawing from general legal principles, the objectives and purposes of the statutory scheme, the principles of labour relations, the nature of the collective bargaining process, and the factual matrix of the grievances of which they are seized. Arbitrators are uniquely placed to respond to the requirements of the employer-employee relationship but need flexibility to craft appropriate remedial doctrines when the need arises. However, arbitral discretion does have its boundaries and an arbitral award that flexes a common law or equitable principle in a manner that does not respond reasonably to the distinctive nature of labour relations necessarily remains subject to judicial review for reasonableness.

The concept of reasonableness relates primarily to the transparency and intelligibility of the reasons given for the decision but also encompasses a quality requirement that applies to the reasons and to the outcome of the decision-making process. In this case, the arbitrator’s reasons are not just transparent and intelligible, but coherent as well and his reasons were amply sufficient to explain why he imposed the remedy of estoppel.

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