The Supreme Court of Canada recently rendered three decisions that finally settle the issue of the jurisdiction of an arbitrator with respect to Section 124 of An Act Respecting Labour Standards (ALS). These decisions deal with employees, i.e., a teacher, a university professor and two government employees who are credited with at least two years of service with their employer and who filed grievances alleging that they had been terminated without cause, in contravention of Section 124 of the ALS. The three decisions raise the same legal issues, and as such, the judges’ positions were consistent.

The judges unanimously decided that Section 124 of the ALS is not incorporated into the collective agreement. They also decided that any provision of a collective agreement — or in an employment contract — that prevents an employee with two years of service from contesting a termination made without good and sufficient cause is of no effect.

However, in cases where the parties to a collective agreement have expressly denied the arbitration proceeding to certain categories of employees, the judges are divided (five to four) on this: should arbitrators nonetheless have jurisdiction to hear the complaint and grant the same remedies as would the Commission des relations du travail (CRT)?

The majority decision, written by Justice LeBel, bases its reasoning on the hierarchy of the sources of law as such:

"The status of the ALS as a statute of public order must be considered from the perspective of how the hierarchy of relevant sources of labour law affects the content and implementation of collective agreements, not from that of the implicit incorporation argument."

In other words, the legislative superiority of the ALS renders null and void any provision that is inconsistent with it, and for the majority; this includes a provision that denies an arbitrator jurisdiction to oversee the employer’s decision to terminate an employee credited with two years of uninterrupted service.

Once such a provision is set aside, the arbitrator must see whether or not he or she has the power to grant the same remedies as the CRT. If so — as is usually the case — he or she must determine whether the employee was terminated for a good and sufficient cause. If the collective agreement does not provide for equivalent remedies, then the employee is obliged to file a complaint before the CRT.

Writing for the minority, Justice Deschamps criticizes the majority approach, which she views as merely "reading out" a provision of the collective agreement. She agrees that, considering the public nature of the ALS, an employer cannot terminate an employee who is credited with two years of service without a good and sufficient cause. However, she believes that there is no requirement that the parties confer responsibility for the enforcement of the protection on a grievance arbitrator.

Justice Deschamps also mentions that the arbitrator’s power to interpret and apply any laws or regulations in the assessment of a grievance must only be exercised when the parties have primarily given such jurisdiction to the decision-maker. The provisions of a collective agreement limiting the arbitration proceeding would not be contrary to public order because they do not deprive an employee from exercising his/her rights under Section 124 of the ALS before the CRT. As such, neither the ALS, nor the Labour Code prevent the parties from limiting the arbitration proceeding.

Tips for Employers

The majority ruling has considerably limited the parties’ liberty to negotiate which category of employees will be entitled to the arbitration proceeding. Although the theory of the implicit incorporation of the ALS in the collective agreement has been unanimously rejected, the practical effect of the ruling of the majority decision is somewhat equivalent to such incorporation.

The positions of the judges were consistent among all three decisions, as they raise the same legal issues.

The unions are likely heartened by these decisions, which they believe represent a victory for employees of uncertain status.

As a result, employers should now bear in mind that, in the event that the conditions set out above be met, an arbitrator has jurisdiction to oversee the termination of any employee who is credited with at least two years of uninterrupted service. This would include any category of employee, e.g., seasonal, temporary or contractual employees as defined in the collective agreement.