PROVINCE OF PRINCE EDWARD ISLAND IN THE SUPREME COURT - APPEAL DIVISION

Transcription

1 PROVINCE OF PRINCE EDWARD ISLAND IN THE SUPREME COURT - APPEAL DIVISION Date: Docket: AD-0698 Registry: Charlottetown BETWEEN: THE CHARLOTTETOWN POLICE ASSOCIATION, LOCAL 301 OF THE POLICE ASSOCIATION OF NOVA SCOTIA APPELLANT (RESPONDENT) AND: THE CITY OF CHARLOTTETOWN RESPONDENT (RESPONDENT) AND: THE BOARD OF ARBITRATION, constituted pursuant to Collective Agreement between the City of Charlottetown and the Charlottetown Police Association, Local 301, and the Police Association of Nova Scotia RESPONDENT (RESPONDENT) Before: The Honorable Chief Justice N.H. Carruthers The Honorable Mr. Justice G.E. Mitchell The Honorable Mr. Justice J.A. McQuaid Mark Ledwell and Donna L. MacEwen David W. Hooley and Karen A. Campbell Counsel for the Appellant Counsel for the Respondent Place and Date of Hearing Place and Date of Judgment Charlottetown, Prince Edward Island March 11 and 13, 1997 Charlottetown, Prince Edward Island July 8, 1997 Written Reasons by: The Honorable Mr. Justice J.A. McQuaid Concurred in by: The Honorable Chief Justice N.H. Carruthers The Honorable Mr. Justice G.E. Mitchell

2 - i - Date: Docket: AD-0698 Registry: Charlottetown THE CHARLOTTETOWN POLICE ASSOCIATION, LOCAL 301 OF THE POLICE ASSOCIATION OF NOVA SCOTIA APPELLANT (RESPONDENT) AND THE CITY OF CHARLOTTETOWN RESPONDENT (RESPONDENT) AND THE BOARD OF ARBITRATION, constituted pursuant to Collective Agreement between the City of Charlottetown and the Charlottetown Police Association, Local 301, and the Police Association of Nova Scotia RESPONDENT (RESPONDENT) (14 pages) Before: Carruthers, C.J.P.E.I.; Mitchell and McQuaid, JJ.A. Heard: March 11 and 13, 1997 Judgment: July 8, 1997 ADMINISTRATIVE LAW - Judicial Review - Scope of Review On an application for judicial review of the decision of an arbitration board provided for under the provisions of a collective agreement, the trial judge nullified the decision of the board on the ground that in determining the reasonableness of a management rule which affected the private lives of the employees, the board had erred in too narrowly restricting its consideration of what was in the employer s Alegitimate interest.@ The trial judge also found this determination to be a matter of broad public policy upon which the board should, on review, be held to the standard of correctness. The Union appealed. HELD: The appeal was allowed. In determining the reasonableness of a management rule which affected the private lives of employees, the breach of which had disciplinary consequences, the board was acting within its mandate of determining the application and interpretation of the collective agreement and the decision of the board was not to be disturbed unless it was patently unreasonable. As it was not, the decision of the board was restored. - ii -.../2

3 CASES CONSIDERED: Pezim v. British Columbia (Superintendent of Brokers), [1994] 2 S.C.R. 557 (S.C.C.); Toronto (City) Board of Education v. Ontario Secondary School Teachers Federation, District 15, [1997] S.C.J. (QL) No. 27 (S.C.C.); Dayco (Canada) Ltd. v. CAW - Canada, [1993] 2 S.C.R. 230 (S.C.C.); Re Metropolitan Toronto Board of Commissioners of Police and Metropolitan Toronto Police Association et al., [1981] 124 D.L.R. (3rd) 684 (Ont.C.A.); Re Council of Printing Industries of Canada and Toronto Printing Pressmen & Assistants Union, No. 10 et al., [1983] 149 D.L.R. (3rd) 53 (Ont.C.A.); Municipality of Metropolitan Toronto v. Canadian Union of Public Employees, Local 43, [1990] 69 D.L.R. (4th) 268 (Ont.C.A.); Stelco Inc. v. United Steelworkers of America, Local 1005 et al., [1994] 111 D.L.R. (4th) 662 (Ont. Div. Ct.); Canada (A.G.) v. Mossop, [1993] 1 S.C.R. 554 (S.C.C.); UES Local 298 v. Bibeault, [1988] 2 S.C.R (S.C.C.); Maritime Electric Company, Limited v. The International Brotherhood of Electrical Workers, Local 1432 and Vince Murnaghan, [1993] 2 P.E.I.R. 45 (P.E.I.S.C.-A.D.) STATUTES CONSIDERED: Judicial Review Act, R.S.P.E.I. 1988, Cap. S-10; Labour Act, R.S.P.E.I. 1988, Cap. L-1, s.37(2) TEXTS CONSIDERED: Brown & Beatty: Canadian Labour Arbitration, (3rd) 1997, Canada Law Book Mark Ledwell and Donna L. MacEwen, for the appellant David W. Hooley and Karen L. Campbell, for the Respondent City of Charlottetown

4 McQuaid J.A.: [1] On August 14, 1989, the City of Charlottetown passed a resolution adopting a policy whereby all permanent employees of the City hired subsequent to that date were required to be a resident of the City. The resolution also placed this requirement on all permanent employees hired prior to August 14, 1989, and who, upon being hired, had agreed that the residency requirement would constitute a condition of their employment. On April 8, 1991, the Police Association, as the bargaining agent of the members of the Police Force employed by the City, filed a grievance on the grounds that the policy was an unreasonable exercise of management rights and was in contravention of Articles 1, 2, and 38 of the collective agreement which had been entered into between the parties. The grievance was heard before a three-person arbitration board. They delivered their decision on February 22, 1993, wherein the Chairman of the Board, writing for the majority, allowed the grievance and held that the resolution enacted by the City requiring all employees to be residents of the City was an unwarranted and unreasonable interference with the rights of the employee pursuant to the provisions of the collective agreement. One member of the panel dissented and he wrote reasons for his dissent. [2] On March 24, 1993, the City sought judicial review of the majority decision of the Board of Arbitration pursuant to the provisions of the Judicial Review Act, R.S.P.E.I. 1988, Cap. S-10. The City requested that the decision of the Arbitration Board be nullified or alternatively, that the matter be referred back to a newly constituted board in accordance with specific findings of the court. [3] The articles of the collective agreement which were relevant to the issues before the Board of Arbitration are as follows: ARTICLE 1 - MANAGEMENT RIGHTS The Union acknowledges that it is the right and function of the Employer, subject to the terms and conditions of this Agreement to hire, promote, demote, transfer, train, lay-off, recall, classify and determine duties of employees and also the right of the Employer to discipline or discharge an employee for just cause, provided that such action may be the subject of a grievance and dealt with as provided elsewhere in this Agreement. ARTICLE 2 - NO DISCRIMINATION (a) (b) The Union and the Employer agree that there will be no intimidation, interference, restraint, or coercion exercised or practised with respect to any employee of the Employer by any of its members or representatives. Equal Pay for Equal Work - The principle of equal pay for equal work will apply regardless of sex.

5 Page: ARTICLE 38 - RULES AND REGULATIONS (a) (b) (c) (d) The Employer may establish rules and regulations which employees must obey. The Union may make recommendations for changes in the rules and regulations. If no agreement is reached between the parties, either party may proceed to arbitration for a settlement. Nothing in the rules and regulations shall conflict with the terms and conditions of this Collective Agreement. TRIAL JUDGE S DECISION [4] After hearing the application for judicial review, the trial judge made the following findings: (1) the grievance was arbitrable; (2) by assuming jurisdiction and entering into a consideration of whether the residency rule was reasonable, the Board did not rewrite the Collective Agreement or add terms thereto contrary to Article 11(d); (3) the Board, in considering the reasonableness of the rule, properly considered whether the City had established a substantial connection between its legitimate interest and the impugned rule, but erred when it determined the legitimate interest of the City to be the provision of services and good government; (4) a determination of what was in the legitimate interest of the City is a question involving A... a general question of law with wide social implications in which the Board had no particular expertise...,@ consequently the standard of review is one of correctness; (5) the Board should have applied a broader test that would have properly assessed the legitimate interest of the City as a municipal corporation and the functions it performs; (6) the concept of the Alegitimate interest@ of an employer is a concept of general legal reasoning beyond the A... scope and purview of the collective agreement...@ upon which an Arbitration Board s decision is subject to review on a standard of correctness; and (7) the Board ignored essential or crucial evidence thereby reaching its conclusions in an unreasonable manner resulting in a loss of jurisdiction. In the result, the trial judge nullified the decision of the majority of the Board. [5] The Union appealed from the trial judge s findings (3) (4), (5), (6) and (7) while the City cross-appealed from the trial judge s findings (1) and (2). DISPOSITION [6] I would dismiss the cross-appeal of the City and allow the Union s appeal.

6 Page: 3 CROSS-APPEAL [7] As indicated, the City s cross-appeal was founded on two grounds. Firstly, that the trial judge erred in finding the grievance to be arbitrable and secondly, the trial judge erred in finding the Board did not, by entertaining the grievance and entering into a consideration as to whether or not the residency rule was reasonable, rewrite the collective agreement by effectively inserting a residence clause. The City abandoned the first ground of the crossappeal. [8] The residency requirement was a rule made by management pursuant to its rulemaking powers in Article 38 of the collective agreement. Given the evidence of the City Administrator, which was accepted by the Board, the parties do not dispute that the residency requirement is a continuing condition of employment, breach of which would provide just cause for dismissal. [9] The issue to be addressed on the cross-appeal is whether employer rules made pursuant to the provisions of the collective agreement must meet the test of reasonableness. [10] In this case the collective agreement does not contain a clause requiring members of the police force to live in the City. There is no restriction as to where they may live. Nevertheless, it was open to the City, as employer, to make such a rule respecting residency pursuant to Article 38(a) of the collective agreement. Pursuant to Article 38(c) this rulemaking power is subject to the condition that the rule made shall not conflict with the terms and conditions of the collective agreement. Despite the fact the agreement does not provide for the rule to be reasonable, there may exist a duty on the City to act reasonably in making rules pursuant to Article 38. [11] This issue has been canvassed in three decisions of the Ontario Court of Appeal, namely, Re Metropolitan Toronto Board of Commissioners of Police and Metropolitan Toronto Police Association et al., [1981] 124 D.L.R. (3rd) 684 (Ont.C.A.)(leave to appeal to the Supreme Court of Canada denied October 19, 1981); Re Council of Printing Industries of Canada and Toronto Printing Pressmen & Assistants Union, No. 10 et al., [1983] 149 D.L.R. (3rd) 53 (Ont.C.A.); and Metropolitan Toronto (Municipality) v. C.U.P.E. [1990] 69 D.L.R. (4th) 268 (Ont.C.A.). All three decisions are explained and discussed in the reasons of Moldaver J. (as he then was) in Stelco Inc. v. U.S.W.A., Local 1005, [1994] 111 D.L.R. (4th) 662 (Ont. Div. Ct.). [12] In Re Metropolitan Toronto Board of Commissioners of Police and Metropolitan Toronto Police Association et al., supra, the Court held that the management rights clause gave the employer the exclusive right to determine how it chose to exercise the powers conferred, unless those powers were expressly circumscribed by other provisions of the collective agreement. The Court held that the power to challenge a management decision

7 Page: 4 made under such a clause must be found in some provision of the agreement, and it is not correct to imply a term in the agreement that management rights will be applied Afairly and without discrimination.@ See: The reasons of Houlden J.A. at p.687. [13] In the Re Council of Printing Industries of Canada and Toronto Printing Pressmen & Assistants Union, No. 10 et al., supra, the Board dealt with two provisions of the applicable collective agreement, one which addressed the classification of employees to permanent status and the other which addressed seniority rights. Management had exercised its discretion under the article which permitted it to classify certain employees as permanent and the Union grieved alleging that management s exercise of discretion under this clause abridged the seniority rights preserved to employees in the other clause, thereby resulting in a discriminatory exercise of discretion. The majority of the Board agreed that management had acted discriminatively in the classification process, and that the mandatory obligation to permanently classify employees must be done in a bona fide fashion. The Divisional Court applied Re Metropolitan Toronto Board of Commissioners of Police and Metropolitan Toronto Police Association et al., supra, and concluded that the Board exceeded jurisdiction when they inquired as to whether or not management had exercised its rights fairly and without discrimination. On appeal, MacKinnon A.C.J.O. carefully reviewed the majority decision of the Board and at p.59 he stated:...the majority concluded, although many words were used, that the mandatory obligation to permanently classify must be done in a bona fide fashion. They then proceeded to consider whether the carrying out of a permanent classification obligation had indeed been discharged in a bona fide fashion and concluded, on their interpretation of the facts, that it had not.... [14] MacKinnon A.C.J.O. then concluded that the decision of the majority of the Board that management had a duty to act in good faith when permanently classifying employees, having consideration to the clause respecting seniority, was an interpretation the provisions of the relevant collective agreement would reasonably bear and thus was not patently unreasonable. Accordingly, the Court held the Board did not act in excess of jurisdiction when it embarked upon its consideration as to the reasonableness of the relevant article. The Ontario Court of Appeal is, therefore, stating that in exercising discretion under one article, which might have a serious impact on another, management must exercise its discretion honestly, reasonably, or in a bona fide manner. See: Stelco Inc. v. U.S.W.A., Local 1005 et al., supra, per Moldaver J. at p.672. [15] In Metropolitan Toronto (Municipality) v. CUPE Local 43, supra, Tarnopolsky J.A. for the Court, set forth the union s position as follows, at p.284:...the basic thrust of these submissions is that, where a rule has disciplinary consequences and where the collective agreement provides, as this one does, that discipline must be for reasonable cause, the Board is correct in assessing the reasonableness of the rule.

8 Page: 5 [16] He interpreted Re Council of Printing Industries of Canada and Toronto Printing Pressmen & Assistants Union, No. 10 et al., supra, as rejecting the broad proposition in Re Metropolitan Toronto Board of Commissioners of Police and Metropolitan Toronto Police Association et al., supra, that there is never a duty on an employer to act reasonably in the exercise of unlimited discretion conferred by a management rights clause or another clause in the collective agreement giving management discretion to act. At p.285 he concluded, based on Re Council of Printing Industries of Canada and Toronto Printing Pressmen & Assistants Union, No. 10 et al., supra, that:... it is not patently unreasonable for an arbitrator to oblige management to exercise its discretion reasonably, where to do so unreasonably would be to create a conflict with or undermine the rights conferred by some other provision in the collective agreement. [17] Tarnopolsky J.A. goes on at p.286 to point out that neither of the foregoing cases involved a rule with disciplinary consequences. He then affirms, in accepting the Union s argument, that rules with disciplinary consequences must be made reasonably. In other words, an unreasonable rule, or one not made in a bona fida manner and with disciplinary consequences, would conflict with another provision in the collective agreement which protected the employee s right not to be dismissed without just or reasonable cause. The present state of the law is, therefore, that the exercise of management discretion conferred by the provisions of a collective agreement must not only be consistent with other provisions of the agreement but, as well, must be reasonable, if the breach of the rule made in the exercise of that discretion results in disciplinary action. [18] In this case, management had the right to make rules that were consistent with the terms of the collective agreement. Furthermore, management had the right, subject to the terms of the collective agreement:... to hire, promote, demote, transfer, train, lay off, recall, classify and determine duties of employees... and to discipline or discharge for just cause... [19] The rule as to residency does not conflict with other provisions of the collective agreement but, as breach of this rule would have disciplinary consequences and could be grounds for dismissal for just cause, the City must demonstrate that the rule is reasonable and was enacted in good faith. Therefore, the Board s inquiry as to whether or not the rule was reasonable was not an act tantamount to rewriting the collective agreement and was not in excess of the Board s jurisdiction. Accordingly, as the trial judge s decision on this issue was not clearly wrong, unreasonable or plainly rooted in an error of principle, he did not err and the cross-appeal is dismissed. MAIN APPEAL

9 Page: 6 [20] The issue raised by the main appeal is the standard of review to be employed on judicial review of the Board s decision that the City had not discharged the onus of establishing there was a substantial connection between the City s legitimate interest and the residency rule. [21] There is a wealth of arbitral jurisprudence which directs that the measure of the reasonableness of a rule made by an employer which affects the private lives of the employee is: there must be a substantial connection between the rule and the employer s legitimate interest. In Brown and Beatty, Canadian Labour Arbitration (3rd) Canada Law Book, the authors express it this way at p.4-15: In applying the standard of reasonableness arbitrators assess the extent to which the rule is necessary to protect the employer s interest in operating the plant, in preserving its property, and generally in carrying out its operations in a reasonably safe, efficient and orderly manner.... [22] There is no question the rule here is one which affects the private lives of the members of the police force in the City of Charlottetown. Therefore, it was necessary for the City to have established before the Board that the rule curtails conduct (living outside the City) which would harm the City s legitimate interest. Implicitly, the City must also establish its legitimate interest as an employer. [23] This is precisely what the majority of the Board focussed on in assessing the reasonableness of the residency rule. It determined from the evidence of the City Administrator that the legitimate interest of the city was to provide services and good government. Furthermore, it found on the evidence that the City had not established its legitimate interest of providing services and good government was in any manner curtailed by the fact that police officers might reside outside the boundaries of the City. [24] The Board was required to interpret the provisions of the collective agreement to determine if the residency rule violated some employee right contained in the agreement, specifically, the right of the employee to reasonable management rules which constituted continuing conditions of employment with disciplinary consequences. In doing so, the Board was required to measure the reasonableness of the rule by assessing whether the employer had established a substantial connection between its legitimate interest and the rule. Having employed the correct test, the findings of the Board in relation thereto are factual questions pertaining to the interpretation and application of the collective agreement. [25] The determination to be made is limited to the parties to the collective agreement, and it does not have Aa direct influence on society at large in relation to basic social values.@ See: Canada (A.G.) v. Mossop, [1993] 1 S.C.R. 554 (S.C.C.). The determination does not involve the interpretation of statutory provisions limiting or extending the jurisdiction of

10 Page: 7 the Board. See: UES Local 298 v. Bibeault, [1988] 2 S.C.R (S.C.C.) and Dayco (Canada) Ltd. v. CAW - Canada, [1993] 2 S.C.R. 230 (S.C.C.). In deploying the test and considering its elements, the Board was acting within Ahome territory.@ [26] The Board derives its authority from s.37(2) of the Labour Act, R.S.P.E.I Cap. L-1 and the collective agreement. Its decisions are protected by a clause which provides as follows: Article 11(d)... The decision of the Board of Arbitration shall be final and binding and enforceable on all parties, but in no event shall the Board of Arbitration have the power to change this Agreement or to alter, modify or amend any of its provisions... [27] As Iacobucci J. points out in Pezim v. British Columbia (Superintendent of Brokers), [1994] 2 S.C.R. 557 (S.C.C.), the large number of factors relevant in determining the applicable standard of review in a particular case has led courts to develop a spectrum ranging from the standard of reasonableness to that of correctness. Deference is highest at the reasonableness end of the spectrum where a tribunal is protected by a Atrue@ privative clause in deciding a matter within its jurisdiction and from which there is no statutory right of appeal. Deference in terms of legal questions is lowest at the correctness end of the spectrum where the question is the interpretation of a provision which limits the tribunal s jurisdiction, or where there is a statutory right of appeal which permits the court to substitute its opinion for that of the tribunal, and where the tribunal s level of expertise is no greater than that of the court on the matter in issue. See: Pezim, supra, pp [28] The purpose of a grievance/arbitration procedure is to achieve final and prompt resolution of disputes arising between parties to a collective agreement which disputes usually arise from the interpretation or application of the agreement as well as from the disciplinary action of employers. See: Toronto (City) Board of Education v. Ontario Secondary School Teachers Federation, District 15, [1997] S.C.J. (QL) No. 27 (S.C.C.) at para. 36. La Forest J. said in Dayco, supra, at p.266, that the expertise of a labor arbitrator A... is the interpretation of collective agreements and the resolution of factual disputes pertaining to them.@ While decisions of labor arbitrators on matters of law may fall closer than those of Labor Relation Boards toward the correctness end of the spectrum, their decisions are at the reasonableness end of the spectrum when the Board is acting within jurisdiction in resolving disputes arising under a Collective Agreement. In the Toronto (City) Board of Education v. Ontario Secondary School Teachers Federation, District 15 supra, Cory J. explained the rationale for this level of deference when he said, at paragraph 37: Indeed the principle of judicial deference is no more than the recognition by the courts that legislators have determined that members of an arbitration board with their experience and expert knowledge should be those who resolve labor disputes arising under a collective agreement.

11 Page: 8 [29] In Maritime Electric Company, Limited v. The International Brotherhood of Electrical Workers, Local 1432 and Vince Murnaghan, [1993] 2 P.E.I.R. 45 (P.E.I.S.C.- A.D.), this Court concluded, at pp , that tribunals protected by Anear privative clauses@ or Afinal and binding clauses@ are to be accorded deference, and when acting within jurisdiction their decisions are not to be interfered with unless they are patently unreasonable. The trial judge did not apply this decision because he was of the opinion it had been overtaken by the Supreme Court of Canada s decision in Re Dayco (Canada) Ltd. v. CAW - Canada, supra. With respect, I am unable to agree. The Dayco case was decided before Maritime Electric. It was considered by the Court at p. 56, and the Court was of the opinion it was not applicable to the issues. The two decisions are not incompatible. [30] In Dayco the company had provided group insurance benefits to its employees under collective agreements which were in effect during the company s operation of a certain plant. Prior to the final closing of the plant, the company and the union negotiated a shutdown agreement which provided that group insurance benefits for active employees would be discontinued six months after plant closure. There was no mention in the shutdown agreement of retirees benefits. The collective agreement was formally terminated, the pension plan was wound up, and an annuity was bought to discharge the company s pension obligations. The company advised all retirees that their benefits would be terminated when benefits for active employees ceased under the shutdown agreement. The union grieved on behalf of the retirees, and the company, in refusing to acknowledge the collective agreement, objected to the jurisdiction of the arbitrator. [31] In writing for the majority, La Forest J. outlined the findings of the arbitrator, and the issues raised by the appeal to the Supreme Court of Canada. At p. 249 he stated: At the outset it is important to understand exactly what the arbitrator decided in this case, and the scope of the issue brought before this Court. When the union s grievance was submitted to arbitration, the company objected because there was no collective agreement in place at the time the said grievance was lodged, and the Company has no obligations to these retirees on any other basis. Conceivably, this objection could encompass a jurisdictional challenge on two levels. First, the company could (and did) advance the general proposition that a promise in a collective agreement to pay retirement benefits, no matter how strongly worded, cannot survive the expiration of that agreement. However, the company could also argue the narrower point that the specific terms of the agreement under grievance did not provide for vesting of retirement benefits.... [32] At p.250 he also stated: In any event, the case comes to this Court only on the first issue outlined above. Leave to appeal was sought only on the question of the survivability of retirement benefits in general, and counsel for the company confined his

12 Page: 9 submissions to that issue. The Court was not asked to review the arbitrator s interpretation of the agreement at hand. Had that issue properly been before this Court, I have no doubt that the scope of our review of that aspect of the arbitration award would have been a narrow one--we would have embarked on a patent unreasonability enquiry. However, on the more general level at which the jurisdictional debate was engaged in this Court, I am of the view that the appropriate scrutiny of the arbitrator s decision is to a standard of correctness.... (Emphasis added) [33] At the commencement of his reasons, La Forest J. made it clear that courts should defer to the expertise of labour arbitrators in the interpretation of collective agreements. However, he expressed the view that the case before him was different. At pp he said: To begin, I would not wish my conclusions on the standard of review in this case to be taken as a retreat from the deferential approach to judicial review of administrative tribunals since the decision of this Court in Canadian Union of Public Employees, Local 963 v. New Brunswick Liquor Corp., [1979] 2 S.C.R Nor are the conclusions here inconsistent with the previous statements by this Court as to the appropriate scope of judicial review of arbitration awards made pursuant to s.44 of the Act. This Court has stated in previous cases that courts should, as a matter of policy, defer to the expertise of the arbitrator in questions relating to the interpretation of collective agreements: see Volvo Canada Ltd. v. U.A.W., Local 720, [1980] 1 S.C.R. 178 and Douglas Aircraft Co. of Canada v. McConnell, [1980] 1 S.C.R This development is traced in the dissenting reasons of Wilson J. in National Corn Growers Assn. v. Canada (Import Tribunal), [1990] 2 S.C.R. 1324, at pp It is clear that an arbitrator has jurisdiction stricto sensu to interpret the provisions of a collective agreement in the course of determining the arbitrability of matters under that agreement. In that case the arbitrator is acting within his or her home territory, and any judicial review of that interpretation must only be to a standard of patent unreasonableness. But this is a different case. Here, the viability and subsistence of the collective agreement is challenged. The company alleges that regardless of the interpretation of the agreement, it cannot survive to serve as the basis for this arbitration. The collective agreement is the foundation of the arbitrator s jurisdiction, and in determining that it exists or subsists the arbitrator must be correct. (Emphasis added) [34] Section 44 of the Ontario Labour Act, which was in issue and which was imported into the collective agreement in the same manner that s.37(2) of the Labour Act is imported into the collective agreement in this case, provides that the decision of an arbitrator is Afinal and binding@ on the parties to the collective agreement. That is the language which appears in s.37(2) and the collective agreement in this case. [35] The issue in Dayco was whether the collective agreement even applied to the issue between the parties and thus in this context La Forest J. was considering the privative

13 Page: 10 effect, if any, of the final and binding clause imported into the collective agreement by the operation of s.44 of the Ontario legislation. In comparing the roles of an arbitrator and the Labour Relations Board, he compares the level of protection afforded the former by s.44 and the level of protection afforded the latter by s.108 of the Ontario Act, he says at p.263:... Here, the privative clause in s.108 applies only to the board, and there is no comparable provision with respect to the arbitrator. The union contends, however, that the phrase final and binding... between the parties in s.44 constitutes a privative clause, a contention accepted by the Court of Appeal. However, the most that can be said for the phrase is that it has limited privative effect on the issues in this appeal. (Emphasis Added) [36] Further at pp he says: Whatever the status of the clause in s.44, the section should be contrasted with the strong and explicit privative clause in s.108 protecting decisions of the Labour Relations Board. Clearly, if the legislature had intended to mandate the same judicial deference to an arbitrator as to the board, it could simply have brought the arbitrator under the shelter of s.108. That is not the case, and I am left with the conclusion that the legislation contemplates a more limited shield against judicial review for decisions of an arbitrator. The Court of Appeal came to a very different conclusion based on certain jurisprudence in Ontario, culminating with Metropolitan Toronto (Municipality) v. C.U.P.E., Loc. 43, supra, which has found that the final and binding clause, and like terminology in other statutes, constitutes a form of privative clause (at p.275). As I understand the reasoning in this case law, it is based on a combination of the words themselves and a judicial policy of deference to the decisions of labour arbitrators. However, I have grave doubts as to the merits of this approach, at least in so far as it is used (as here) to elevate statutory words to a privative status not intended by the legislature. In this regard, I recognize that in National Corn Growers, supra, this Court found privative effect in the following phrase in s. 76 of the Special Import Measures Act, S.C. 1984, c. 25:... every order or finding of the Tribunal is final and conclusive. But the findings in National Corn Growers involved different words in a different statutory setting. One could quibble over the distinctions between the phrases final and conclusive and final and binding upon the parties, and to me the latter phrase does import less privative effect. But the important point is that the driving factor in that decision was not the clause alone but deference to the relative expertise of the administrative tribunal over the specialized questions involved. I do not think that decision precludes a determination that s.44 of the Act in this case does not have privative effect. [37] The conclusion of La Forest J. that the final and binding clause in Dayco was of limited or no privative effect was clearly restricted to the issue arising in that case, which was whether the collective agreement applied to the dispute in issue. As he points out, the Act provides A... a more limited shield against judicial review for the decisions of an arbitrator.@ That is not to be interpreted as meaning such a clause does not provide any

14 Page: 11 shield. Deference is still to be accorded arbitrators whose decisions are protected by a final and binding clause on questions relating to the interpretation of collective agreements, and on issues arising within the collective agreement. Their decisions are subject to review on the standard of patent unreasonableness. [38] The expert skill and knowledge exercised by an arbitrator in applying and interpreting a collective agreement does not usually extend to the interpretation of Aoutside@ legislation or the common law. Accordingly, the arbitrator s decision on these matters is usually subject to the standard of correctness. An exception exists, however, where the legislation or principle of common law is A... intimately connected with the mandate of the tribunal and is encountered frequently as a result.@ See: Toronto (City) Board of Education v. Ontario Secondary School Teachers Federation, District 15, supra, per Cory J. at para. 39. [39] In this case, the Board of Arbitration was called upon to assess the reasonableness of a management rule affecting the private lives of employees and made pursuant to the terms of a collective agreement which governed the relationship of the parties. In doing so, the Board was obliged to employ a test which is widely accepted by arbitrators and the courts as the proper means of measuring the reasonableness of such a rule. Even if one were to concede this test was a principle of common law, it is, nevertheless, intimately connected to the mandate of the Board and is a principle which might frequently be encountered by labour arbitrators. Accordingly, it would be within the exception to the rule that the Board s decision on the application of the test is reviewable on the standard of correctness. [40] Furthermore, the question at issue, whether the Board properly applied the test for determining reasonableness of the City s residency rule, does not go to the jurisdiction of the Board. While there appeared to be some initial objection, both before the Board and the trial judge as to the applicability of the collective agreement, these have not been pursued with any degree of seriousness, and whether the collective agreement was applicable to the dispute does not appear to have been seriously in issue. The Board concluded and the trial judge agreed, the grievance was arbitrable despite the fact there was no disciplinary action. While the City cross-appealed on this issue, it abandoned this ground of the cross-appeal. Also, the remaining question or issue which arose on the cross-appeal, whether the Board was entitled to embark upon a consideration of the reasonableness of the residency rule, does not go to jurisdiction but rather to whether the Board in entering upon such a deliberation acted in excess of its jurisdiction. Finally, the issue as to whether or not the Board applied a too narrow criterion in determining what was in the City s Alegitimate interest@ was part of the test of establishing the reasonableness of the residency rule, and it does not go to the jurisdiction of the Board, but rather to a consideration of whether the Board may have acted in excess of its jurisdiction. [41] The determination of an employer s Alegitimate interest,@ regardless of whether the

15 Page: 12 employer may be a municipal corporation, is not a matter of broad public policy or an issue of law with implications on those other than the parties to the collective agreement. The arbitrator s determination of an employer s legitimate interest is a question of fact within the expertise of the arbitrator when determining the application and interpretation of management rules made pursuant to the provisions of a collective agreement. Accordingly, the arbitrator s finding on this issue, particularly if it is protected by a final and binding clause, is entitled to deference and must not be nullified on review unless it is patently unreasonable. The trial judge in holding the Board to a standard of correctness on the determination of the employer s legitimate interest, made an error which was plainly rooted in principle. Accordingly, on this ground, I would allow the appeal and restore the decision of the Board. [42] The final issue arising on the main appeal relates to the trial judge s decision to nullify the decision of the majority of the Board because they ignored essential or crucial evidence thereby reaching their conclusion in an unreasonable manner. [43] By agreement of the parties, the evidence adduced before the Board was not recorded and a transcript of the evidence did not exist as part of the record. Nevertheless, the trial judge concluded, based on a summary of the evidence prepared by the dissenting member of the Board and set forth in his reasons, as well as from the submissions of counsel, that the majority of the Board in reaching their conclusion ignored crucial evidence. [44] While the dissenting decision is part of the record of the Board, the writer s summary of the evidence cannot be considered a record of the evidence adduced. It may only represent his impressions of the evidence or the inferences he may have drawn from the evidence. The fact the dissenter may have placed his version of the evidence in quotation marks does not give the evidence the authenticity of a true record of the proceedings before the Board. In the absence of a record upon which the trial judge may conclude the decision of the majority was not one upon which it could reasonably have arrived, it is not open to him to find the Board ignored crucial evidence. [45] The trial judge in addressing this issue, also found the majority of the Board had erred in failing to give reasons for their decision. While there is no obligation on the Board to give reasons, they did so and while not elaborate, were sufficient to explain the conclusions reached. Indeed, they found, based on the evidence of the City Administrator, that the City s legitimate interest was the provision of services and good government to the residents. The majority of the Board then concluded the City had failed to discharge the onus of establishing a substantial connection between this legitimate interest and the rule requiring residency. The chair stated: The City was unable to advance a single case where it was unable to provide services due to employees living outside the boundaries of the City. Similarly,

16 Page: 13 the City did not advance any argument that its obligation to provide good government was curtailed because of employees living outside the boundaries of the city. [46] I interpret this to mean the majority assessed the evidence and concluded that the fact members of the Police Force lived outside the City would not in any manner affect the way in which the City provided services and good government to its residents. Accordingly, the Board found the City had failed to show a substantial connection between its stated legitimate interest and its rule requiring the residency of Police Officers within City boundaries. This was a sufficient explanation for the conclusion reached. [47] I would also allow the appeal on this ground. CONCLUSION [48] In conclusion, the cross-appeal of the City is dismissed and the main appeal of the Union is allowed. The decision of the Board is therefore restored, and the Union shall have its costs throughout. The Honorable Mr. Justice J.A. McQuaid I AGREE: The Honorable Chief Justice N.H. Carruthers I AGREE: The Honorable Mr. Justice G.E. Mitchell