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Confusion over arbitrability of employee benefit claims resolved - maybe
Where must a unionized employee claiming an entitlement to benefits pursue the
claim - at arbitration or in court? The reverberations caused by the Ontario Court
of Appeal’s decision on this issue in Pilon v. International Minerals &
Chemical Corporation and London Life Insurance Co. (November 19, 1996), reported in
the July 1997 issue of FOCUS (see
"Ontario Court of Appeal decides arbitrability of employee benefit claims"
on our Publications page), have been felt by numerous arbitrators since that
judgment was released. Now, a decision of the Ontario Divisional Court
may possibly have put an end to the uncertainty, and in the process
restored the pre-Pilon status quo.
Under the traditional arbitral approach, before Pilon, the language of the
collective agreement determined the issue. If the agreement showed the employer
intended to assume responsibility for providing benefits, the employee could pursue
the claim at arbitration. If the agreement was silent about benefits, or if the
employer undertook merely to pay the plan premiums, the employee had to sue the insurer.
The Court in Pilon, ignoring the arbitral case law, held that if
the employee’s entitlement to benefits arose under a collective agreement,
the matter had to be settled at arbitration. Because Pilon had no benefit
entitlement in the absence of the group insurance scheme established by the
collective agreement, he could not proceed against the insurer in court.
ARBITRATORS: DISAGREEMENT ABOUT APPROACH
In the wake of Pilon, arbitrators diverged in their approach to
jurisdiction over benefit claims. In one case, Re Honeywell Ltd and CAW - Canada
(August 28, 1997 and November 20, 1997), where the collective agreement merely
made a benefits plan available to employees who were responsible for paying their
own premiums, the arbitrator stated that Pilon meant that the issue had to be
decided at arbitration. The test for who had jurisdiction was now a simple one:
"[B]ut for the provision of LTD benefits negotiated by the Union into the
collective agreement here, would [the grievor] have had any claim for LTD
benefits to pursue?"
Answering "no" to this question, the arbitrator declared he had jurisdiction
over the dispute, and permitted the union to name the insurer as
a "defendant" in the proceedings.
Other arbitrators, however, remained with the traditional arbitral
approach, and distinguished Pilon on its facts. This was not
difficult to do, given that the collective agreement in Pilon
incorporated the insurance policy into its terms, which traditionally
had meant that a benefits claim could be arbitrated. The problem was that the
Court in Pilon had not relied on this fact in making its decision. Rather,
its jurisdictional criteria had sounded a good deal more like
the "but for" test set out by the arbitrator in the Honeywell case.
CBC v. NABET: NO CLARIFICATION
The Court of Appeal revisited the issue in CBC v. NABET
(December 16, 1997), in which it quashed an
arbitrator's award that ordered the employer to pay life insurance benefits to an
employee’s estate. In its decision, the Court referred to the pre-Pilon case
law, and noted that the collective agreement required only that the employer pay
insurance premiums. The Court ruled that, in ordering the employer to pay benefits
following the insurer’s refusal to do so, the arbitrator had ignored the evidence of
the extent of the employer’s obligations, and had made an order that was patently
unreasonable. The Court made no mention in its reasons of Pilon, which
apparently was not cited by either party in its arguments.
DUBREUIL: PILON'S EFFECT NARROWED
The Re Dubreuil Forest Products Ltd. and IWA - Canada (September 25, 1998)
case arose out of a grievance arbitration under a collective agreement that obliged
the employer only to pay premiums to London Life. Under the arbitral case law, this
would have made the claim inarbitrable.
This is what the employer claimed, but the arbitrator, asserting he was bound by
Pilon, took jurisdiction. Noting, however, that it could not have been the
intention of the Pilon court to make employers liable for payment of benefits
in such circumstances, the arbitrator held that he had the power to issue an award
that would determine the insurer’s liability. He ordered that London Life be notified
of this decision.
The Divisional Court quashed the award, stating that Pilon had to be
viewed in context, and was not a departure from the traditional arbitral approach:
"[T]here is no indication in Pilon that the Court of Appeal intended to bring
about a fundamental change to the jurisdiction of arbitrators. While no reference was
made to the [traditional arbitral approach] in Pilon, the Court of Appeal
found that the collective agreement incorporated by reference the terms of the benefits
handbook. ... The result in that case is, therefore, in accord with the settled
principles for determining the jurisdiction of arbitrators in this
area."
In Our View
The Court that quashed the award in Dubreuil also quashed the Honeywell
award on the same day. Moreover, it held that arbitrators lack the jurisdiction to add
a third party defendant who is not a party to the collective agreement, without the third
party’s consent.
The Court in Dubreuil seems to be saying that Pilon is a case
that is limited to situations where the benefits plan is incorporated into
the collective agreement. The traditional arbitral approach appears to have won out
for the moment. (For more recent developments, see "Ontario Court of Appeal revisits arbitrability of employee benefit claims" on our Publications page.)
For further information, please
contact Jacques A. Emond
at (613) 563-7660, Extension 224.
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