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S.C.C. Frees Labour Arbitrators From Strict Legal Rules


by Hugh McPhail, Q.C.

In what is a very significant development, the Supreme Court of Canada has freed labour arbitrators from having to follow equitable and common law principles, including estoppel, in the same manner as courts of law. The Court decided that labour arbitrators have the power to adapt legal principles as long as they do it “reasonably”.

In future, watch out for arbitrators stretching this to facilitate what they think is fair in the cases they are dealing with. That could sometimes help employers, but we suspect that far more often sympathies will cause tilting of this new arbitral law in favour of employees and trade unions.

It is therefore ironic that the result of the case actually favoured the employer. The employer had a long-standing practice of excluding casual service in calculating vacation benefits which, according to the arbitrator, the Union ought to have been aware of. The employee in question missed a bonus week because of the service calculation method used by the employer.

The arbitrator held that the Union was barred by estoppel from challenging this employer calculation and practice because of its historical acquiescence in the practice.

The Union had been successful in the Manitoba Court of Appeal in overturning the arbitrator’s decision. That court thought that estoppel was not established because there was no evidence that the Union intended, by its silence, to affect its legal relations with the employer. That is a requirement when the courts apply promissory estoppel. The SCC said that such a technical application of the law of estoppel was not required. The proper question for the courts in reviewing an arbitrator’s decision was “whether he adapted and applied the equitable doctrine of estoppel in a manner reasonably consistent with the objectives and purposes of the [legislation], the principles of labour relations, the nature of the collective bargaining process, and the factual matrix of [the]...grievance.”

The decision now casts doubt on how arbitrators will apply many common law principles – not just estoppel. Some arbitrators may see it as a license to break away from many long-standing principles of law. The decision also specifically brings into question the recent Alberta Court of Appeal decision determining that Alberta labour arbitrators are bound by the Smoky River Coal estoppel principles. Click here to read a recent email alert in which we summarized the decision.

Our ability to reliably predict the result of some arbitrations has been significantly weakened. The law is no longer just the law. There is one law for the courts and one for each labour arbitrator to shape.


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