International Union of Operating Engineers, Local 772 v. Philip Utilities Management Corporation

International Union of Operating Engineers, Local 772 v. Philip Utilities Management Corporation Collection Decisions of the Court of Appeal Date 2001-05-15 Docket numbers C34690, C34691 Judges Osborne, Coulter Arthur Anthony; Laskin, John Ivan; Feldman, Kathryn N. Subject Civil Decision Content DATE: 20010515 DOCKETS: C34690 and C34691 COURT OF APPEAL FOR ONTARIO OSBORNE A.C.J.O., LASKIN and FELDMAN JJ.A. BETWEEN: INTERNATIONAL UNION OF OPERATING ENGINEERS, LOCAL 772 ) ) Elizabeth McIntyre and Brian Lawson, for the respondent ) Applicant (Respondent) ) ) ) - and - ) ) PHILIP UTILITIES MANAGEMENT CORPORATION and THE REGIONAL MUNICIPALITY OF HAMILTON-WENTWORTH ) ) ) ) Douglas K. Gray, for the appellant Philip Utilities Management Corporation Robert E. Salisbury, for the appellant Respondents ) ) The Regional Municipality of Hamilton-Wentworth (Appellants) ) ) ) Heard: February 2, 2001 On appeal from the order of the Divisional Court (Justices Dennis F. O’Leary, Kenneth C. Binks and Peter A. Cumming) dated April 18, 2000 [(2000), 32 O.A.C. 252]. LASKIN J.A.: [1] This case requires the court to interpret the “fail safe” provisions of the Social Contract Act.[1] The Act was passed by the Ontario Legislature in June 1993 to reduce spending in the public sector. Future increases in compensation provided for in existing collective agreements were void. However, under s. 24(5) of the Act, a Union could preserve and defer these increases as long as they were not merit increases, cost of living increases or increases resulting from any movements on a pay scale or other grid system. [2] The main issue in this appeal is whether a 5% wage increase to take effect on October 1, 1993, which was provided for in a collective agreement between the respondent Union and the appellant The Regional Municipality of Hamilton-Wentworth (“the Region”) could be preserved and deferred. On a grievance filed by the Union, the arbitrator held that the increase could not be preserved under the Act. On a judicial review application brought by the Union, the Divisional Court quashed the arbitrator’s award and ordered the wage increase to take effect on October 1, 1996 as provided for under the Act. The Region appeals this decision. Philip Utilities Management Corporation (“PUMC”) joins in the appeal as a successor employer. [3] The appellants argue three points: (1) the Divisional Court erred in holding that the standard of review of the arbitrator’s decision was correctness rather than reasonableness; (2) the Divisional Court erred in concluding that the wage increase could be preserved and deferred; (3) even if the wage increase could be preserved, the Divisional Court should have referred the grievance back to the arbitrator to determine the appropriate remedy. Background facts [4] The Union represents the bargaining unit employees at the Hamilton-Wentworth Sewage and Water Treatment facilities, which are now managed and operated by the employer PUMC. Before 1994, the Region had managed and operated the Treatment facilities, and the bargaining unit employees working there were employed by the Region and represented by the Union. [5] The Region and the Union had signed a collective agreement for the three-year period October 1, 1991 to September 30, 1994. Over its duration, the agreement provided for a series of wage increases for various job classifications. The last wage increase, the increase in issue on this appeal, was to come into effect on October 1, 1993 and provided for a 5% increase in each job classification. The following two examples show how the wage increase was set out in the collective agreement: _________________________________________________________________ EFFECTIVE EFFECTIVE CLASSIFICATION SCHEDULE APRIL 1/93 OCTOBER 1/93 ________________________________________________________________________ Control Technologist M-20 24.67 25.90 Instrumentation & Control Technician M-19 23.00 24.15 _________________________________________________________________ [6] The Social Contract Act came into force on June 14, 1993. The Act applied to all public sector employers, including the Region and all employees in the public sector, including the unionized employees at the Treatment facilities. Because of the Act, the employees did not receive their wage increase that was scheduled to take effect on October 1, 1993. On July 5, 1994, the Union gave the Region written notice that in accordance with the Act, it elected to preserve the October 1, 1993 5% increase. [7] In late 1994, the Sewage and Water Treatment facilities were privatized. Under the privatization agreement between the Region and PUMC, the management and operation of the facilities were transferred to PUMC. The Region agreed to fund the disputed wage increase if and when it became due. [8] In October 1994, the Region, PUMC and the Union entered into a tripartite agreement. Under that agreement, PUMC acknowledged that it was a successor employer and was bound by the existing collective agreement between the Region and the Union. To provide a measure of labour stability, PUMC and the Union agreed to renew the collective agreement from October 1, 1994 to March 31, 1996 and to two wage increases of 25¢ per hour each, to take effect on January 1, 1995 and January 1, 1996. [9] Under s. 3(e) of the tripartite agreement, PUMC agreed to implement the 5% October 1, 1993 wage increase to the same extent that the Region was obligated to implement it: 3. (e) With respect to the wage increase that was scheduled to be implemented October 1, 1993 and any other compensation increases contained in the collective agreement that were adversely affected by the Social Contract Act, except for apprentices and employees on probation, Philip Utilities and the Operating Engineers agree that they will only be implemented to the extent that the Regional Municipality of Hamilton-Wentworth would be obligated to implement them. Effective January 1, 1995 probationary employees and apprentices adversely affected by the Social Contract Act shall be paid in accordance with the collective agreement and their apprenticeship contract. [10] Under s. 6.07 of the privatization agreement, the Region agreed to indemnify PUMC for the cost of the 5% increase, which had been “frozen and preserved under the Social Contract Act”, if and when it became due. [11] Privatization removed the Sewage and Water Treatment facilities from the restraints of the Social Contract Act. The employees were now the employees of PUMC in a new bargaining unit and under a separate collective agreement. In September 1996, PUMC and the Union entered into a new collective agreement for the three-year period April 1, 1996 to March 31, 1999. This agreement provided for two 30¢ per hour annual wage increases, on January 1, 1997 and April 1, 1998. [12] Meanwhile, the Union continued to represent the employees of the Region in the public sector bargaining unit out of which the Sewage and Water Treatment facilities’ employees had been transferred. In October 1996, the Union filed three grievances, all alleging that its members failed to receive on October 1, 1996 the October 1, 1993 wage increases that had been preserved under the Act. One grievance was filed against PUMC and it is the subject of this litigation. The other two grievances were filed against the Region on behalf of Union members who remained employed by the Region. These two grievances were settled and withdrawn “with prejudice” when the Region and the Union entered into a new collective agreement for the period October 1, 1996 to September 30, 1998. Under this agreement, the employees received wage increases of 4.5% in October 1996 and 0.5% in April 1997. The parties agreed that these wage increases were not to be construed as an acknowledgement of any legal liability of the Region under the Social Contract Act. Nonetheless, the effect of these wage increases was to restore wage rates to the levels they would have been on on October 1, 1993 but for the Act. The decisions of the arbitrator and the Divisional Court [13] The Union’s grievance against PUMC went to arbitration before Louisa Davie. The appellants raised four issues: the effect of the Social Contract Act, that is whether the October 1, 1993 wage increase could be preserved; the effect of the wage increases under the tripartite agreement; the effect of the “with prejudice” settlement between the Region and the Union; and the effect of the wage increases under the new collective agreement between PUMC and the Union. [14] The arbitrator decided only the first issue. She concluded that the Union’s election in July 1994 did not preserve and defer the 5% wage increase because it fell within the exceptions in s. 24(5) of the Act and, therefore, was a compensation increase that could not be preserved by an election. However, she did not specify what exception applied, instead holding that “it is not necessary to conclusively determine whether the scheduled wage increase is properly characterized as a cost of living increase, a movement through ranges, or movements on a pay scale or grid system.” Because she accepted the appellants’ interpretation of the Social Contract Act, she held that it was unnecessary to decide the other issues. She dismissed the Union’s grievance. [15] The Divisional Court (O’Leary, Binks and Cumming JJ.) reversed the arbitrator’s decision. It held that the sole issue before it was the interpretation of s. 24(5) of the Act and that because the Act is a statute of general application, the arbitrator was required to be correct. The Divisional Court held that her interpretation was wrong. In the court’s view, the wage increase was not a merit increase, a cost of living increase or a grid system increase. It was a simple increase in pay, which could be preserved and deferred. The Divisional Court ordered the 5% wage increase to take effect and be paid from October 1, 1996 “whether or not that pay rate exceeds any pay rate provided in any collective agreement.” [16] I turn now to the appellants’ submissions. First issue: Did the Divisional Court err in holding that the standard of review of the arbitrator’s decision was correctness? [17] The appellants argue that the pragmatic and functional approach mandated by the Supreme Court of Canada calls for curial deference to the arbitrator’s decision. They point out that she was interpreting an employment-related statute under s. 48(12)(j) of the Labour Relations Act and that a grievance over a wage increase lies at the core of an arbitrator’s expertise. They contend that recent decisions of the Supreme Court of Canada emphasize tribunal expertise as a crucial consideration in determining the appropriate standard of review. They submit that the appropriate standard is reasonableness, not correctness. [18] Whatever the merit of this submission, it flies in the face of existing Supreme Court of Canada authority. Beginning with McLeod v. Egan (1974) 46 D.L.R. (3d) 150, the Supreme Court of Canada has consistently held that a labour arbitrator’s interpretation of a statute of general application is reviewable on a standard of correctness. See also Bradburn v. Wentworth Arms Hotel Ltd., [1979] 1 S.C.R. 846; and United Brotherhood of Carpenters and Joiners of America, Local 579 v. Bradco Construction Ltd. (1993), 102 D.L.R. (4th) 402 (S.C.C.). In McLeod v. Egan, the arbitrator had to interpret the Employment Standards Act, an employment-related statute but also a statute of general application. The Social Contract Act also is an employment-related statute of general application. Therefore, although s. 48(12)(j) of the Labour Relations Act gave the arbitrator jurisdiction to interpret the Social Contract Act, her interpretation was not entitled to deference from a reviewing court. The Divisional Court rightly held that the appropriate standard of review was correctness. Second issue: Did the Divisional Court err in concluding that the October 1, 1993 wage increase could be preserved and deferred? [19] This is the main question on the appeal. The answer depends on the interpretation of s. 24(5) of the Social Contract Act. To put this provision in context, I will briefly review the scheme of the Act. The Act was passed on June 14, 1993 and given Royal Assent on July 8, 1993. Its purpose was “to achieve significant savings in public sector expenditures in a fair and equitable manner” for three years. Public sector employers and unions representing public sector employees could comply with the Act in one of two ways. They could negotiate a Local Agreement providing for spending reduction plans, or failing an agreement, they had to comply with the “fail safe” provisions in Part VII of the Act. Part VII, which covered sections 23-35 of the Act, prescribed the terms by which public sector employers and unions were required to reduce spending. The Region and the Union did not negotiate a Local Agreement. Therefore, they were bound by Part VII of the Act. [20] Under s. 24(1), the rate of compensation of a public sector employee was “fixed at the rate that was in effect immediately before June 14, 1993.” The general rule, provided for in s. 24(4), was that an increase in compensation after June 14, 1993 under a collective agreement existing on that date was void. “Compensation” was defined in s. 2 of the Act to mean “all payments and benefits” paid to employees. [21] The Act, however, exempted some increases in compensation from the general rule in s. 24(4). Under s. 24(5), a union, by written notice to the employer, could preserve some increases in compensation scheduled to take effect after June 14, 1993. Section 24(5), which is at the heart of this appeal, provides: 24.–(5) Despite subsection (4), a bargaining agent, by written notice to the employer, may elect to preserve increases in compensation provided for in a collective agreement existing on June 14, 1993, other than compensation described in clause (2)(a), (b) or (c). The three kinds of compensation increases set out in s. 24(2)(a), (b) and (c), which could not be preserved were: 24.–(2) For greater certainty, “compensation” in this section includes, (a)merit increases; (b) cost-of-living increases or other similar movement of or through ranges; and (c) increases resulting from any movements on any pay scale or other grid system. For these compensation increases that could not be preserved, s. 24(8) of the Act prevented ballooning or catch-up agreements after the three-year social contract period ended: 24.–(8) An employee is not entitled to any increases in compensation after March 31, 1996 by way of, (a) merit increases; (b) cost-of-living increases or other similar movement of or through ranges; or (c) increases resulting from any movements on any pay scale or other grid system, except as prescribed by regulation, in respect of employment during the period beginning June 14, 1993 and ending March 31, 1996. [22] Any compensation increase that a union elected to preserve was automatically deferred under s. 24(7)(a) of the Act until three years after the date on which the increase was originally to have occurred in the collective agreement: 24.–(7) If an election is made under subsection (5), (a) any increase in compensation shall be deferred until the third anniversary following the day on which it would have occurred under the collective agreement. [23] The appellants acknowledge that the Union gave the Region proper notice of its election to preserve the 5% wage increase scheduled to occur on October 1, 1993. If the wage increase could be preserved under s. 24(5), then under s. 24(7)(a) it would come into effect on October 1, 1996. Under s. 24(5), the wage increase could be preserved unless it was a merit increase, a cost of living increase or an increase resulting from a movement on a pay scale or other grid system. In my view, this wage increase could be preserved. [24] The 5% increase was not a merit increase. It was not given for an employee’s performance. It was given to all employees without regard to performance. Also no evidence was led and nothing is contained in the collective agreement to suggest that the wage increase was a cost of living adjustment. [25] The appellants sought to support their position by arguing that the 5% increase was an increase resulting from a movement on a pay scale or grid system. I reject that argument. A pay scale or grid ordinarily fixes an employee’s compensation by reference to enumerated factors, typically qualifications or experience, and the employee automatically moves up the pay scale or grid as his or her qualifications or experience increase. In Ontario English Catholic Teachers’ Association v. Lanark, Leeds and Grenville County Roman Catholic Separate School Board (1998), 164 D.L.R. (4th) 429, this court described a salary grid for teachers in similar terms: Salaries of teachers covered by the collective agreement were determined in accordance with a salary grid. … The salary grid consisted of a vertical axis which recognized years of teaching experience from 0 through 12 years and a horizontal axis which recognized formal qualifications in five separate categories, as assessed by the Qualifications Evaluations Council of Ontario. See also Re Board of Trustees of Frontenac, Lennox and Addington Roman Catholic Separate School Board v. Ontario English Catholic Teachers’ Association (1978), 21 O.R. (2d) 364 (Div. Ct.); Re Essex County Board of Education and Ontario Secondary School Teachers’ Federation District 34 (1983), 147 D.L.R. (3d) 446 (Ont. Div. Ct.). [26] The collective agreement between the Region and the Union did not contain any such salary grid. It did not have different salary ranges through which an employee could move. Instead, it set out a single wage that applied to all employees within each job classification. As the Divisional Court said: “It was a simple increase in pay.” [27] Moreover, the Divisional Court’s conclusion is consistent with both the purpose of s. 24(5) and the Act as a whole. As Ms. McIntyre pointed out in her submissions on behalf of the Union, the common theme underlying the three kinds of compensation increases that could not be preserved is that they are increases triggered by events during the three-year freeze period under the Act, and therefore beyond the employer’s control. In contrast, the 5% wage increase in issue on this appeal was freely negotiated by the Region before the Act came into effect. The overall purpose of the Social Contract Act was to reduce public expenditures for three years, not to prevent all wage increases. Those compensation increases that could not be preserved could also not be deferred. See s. 24(8). But other compensation increases, like the one in issue here, could be preserved and correspondingly deferred. [28] The appellants rely on the arbitrator’s interpretation of s. 24(5). The arbitrator interpreted s. 24(5) to mean that no increases in wages, salary or remuneration could be preserved; the only compensation increases that could be preserved must relate to other “payments and benefits paid or provided”. If that were the Legislature’s intent, then it could easily have said so. Instead, it singled out three categories of compensation increases that could not be preserved. Therefore, the Legislature must have intended to permit unions to preserve other compensation increases, including wage increases, not falling within any of the three categories. The 5% wage increase schedule for October 1, 1993 was not a merit increase, a cost of living increase or a salary grid increase. It could therefore be preserved and deferred. [29] The appellants advance one other argument in support of their position. They submit that s. 24(7)(b) of the Act precluded double-dipping. They contend that because the employees received two 25¢ per hour wage increases during the three year Social Contract period, they are precluded from also receiving the October 1, 1993 wage increase. Section 24(7)(b) provides: 24.–(7) (b) no increase in compensation, other than those preserved by the election, shall be given before the third anniversary following the day the collective agreement expires, or, if the collective agreement has been extended under section 35, before the third anniversary of the day it would have expired had it not been extended. On its face, the section does not support the appellants’ argument. Moreover, what their argument ignores is that the 1995 and 1996 25¢ per hour wage increases were negotiated between the Union and PUMC after the privatization agreement came into effect. As private sector employers, PUMC was not bound by the restrictions in the Social Contract Act. Indeed, the tripartite agreement spelled out PUMC’s separate obligation to implement the 5% increase, an obligation not contingent on whether it paid increases in 1995 and 1996. I therefore do not agree with the appellants’ submission on s. 24(7)(b) of the Act. [30] For these reasons, the Divisional Court correctly interpreted s. 24(5) of the Social Contract Act. Third issue: Did the Divisional Court err in failing to refer the grievance back to the arbitrator to determine the appropriate remedy? [31] The Divisional Court ordered the 5% wage increase to take effect on October 1, 1996 in accordance with s. 24(7)(a) of the Act. Although the Divisional Court had jurisdiction to make this order, the appellants submit that the court ought to have referred the grievance back to the arbitrator to determine the appropriate remedy in the light of its interpretation of s. 24(5). [32] The appellants contend that because of her view of s. 24(5), the arbitrator did not deal with the other points relied on by the employer to deny the employees their wage increase. These other points concerned the effect of the “with prejudice” settlement between the Region and the Union and the effect of the wage increases already given to the Treatment facilities’ employees under the tripartite agreement and the new collective agreement with PUMC. The appellants submit that the negotiating history between the parties and the importance of maintaining parity between the Region’s employees and PUMC’s employees will affect the appropriate remedy, even accepting the Divisional Court’s interpretation of s. 24(5). [33] However sceptical one may be of this submission, simple fairness dictates that the appellants not only have an opportunity to present these other points to an arbitrator but to receive a decision on them as well. I would therefore vary paragraph 2 of the Divisional Court’s order and, in its place, declare that the October 1, 1993 wage increase was preserved under s. 24(5) of the Social Contract Act and order that the grievance be referred back to an arbitrator to determine the appropriate remedy. The original arbitrator is not seized of the grievance. The new hearing should be held before a different arbitrator. [34] Because the Union has been largely successful, it is entitled to its costs of the appeal. I would not disturb the costs order made by the Divisional Court. (signed) “John Laskin J.A.” (signed) “I agree C. A. Osborne A.C.J.O.” (signed) “I agree K. Feldman J.A.” Released: May 15, 2001 “CAO” [1] S.O. (1993) c. 5.