Supreme Court Affirms Arbitrators’ Flexibility in Applying Legal Principles

In early December 2011, the Supreme Court of Canada once again confirmed that decisions of arbitrators should be given a high level of deference.

The Court’s decision in Nor-Man Regional Health Authority Inc. v. Manitoba Association of Health Care Professionals involved an arbitrator’s decision of a grievance disputing the interpretation of an article in the collective agreement between the parties. The Employer, Nor-Man, had consistently applied the collective agreement provisions for a period of 20 years without challenged from the Union.

The arbitrator found that it would be unfair for the employer to suffer the consequences of the union’s inaction, and ruled that the union was therefore estopped from relying on the wording of the articles in the collective agreement.

The matter was heard by the Supreme Court of Canada and ultimately allowed the employer’s appeal. The Court applied the standard of reasonableness and held that labour arbitrators are not legally bound to apply equitable and common law principles in the same manner as courts of law.

The Court reiterated that labour arbitrators are “uniquely placed to respond to the exigencies of the employer-employee relationship” and that they “require the flexibility to craft appropriate remedial doctrines when the need arises”. Qualifying this statement, however, the Court added that:

…the domain reserved to arbitral discretion is by no means boundless. An arbitral award that flexes a common law or equitable principle in a manner that does not reasonably respond to the distinctive nature of labour relations necessarily remains subject to judicial review for its reasonableness.

The decision raises some concern in respect of the latitude provided to arbitrators in applying what has been previously considered to be a strict legal principle. The Supreme Court essentially has stated that as long as the decision is reasonable, one of the essential prerequisites of an estoppel need not be there in order for an estoppel to be founded. In light of the Supreme Court’s decision, a degree of certainty in respect of the application of familiar legal principles is now open to question.