Arbitrators not strictly bound by Law or Equity

Nor-Man Regional Health Authority Inc. v. Manitoba Association of Health Care Professionals, 2011 SCC 59 holds that labour arbitrators are not legally bound to apply equitable and common law principles ― including estoppel ― in the same manner as courts of law.  Labour arbitrators  may properly develop doctrines and fashion remedies appropriate in their field, drawing inspiration from general legal principles, the objectives and purposes of the statutory scheme, the principles of labour relations, the nature of the collective bargaining process, and the factual matrix of the grievances of which they are seized.  The broad mandate of arbitrators flows from the broad grant of authority vested in arbitrators by collective agreements, statutes such as The Labour Relations Act (LRA), and from their distinctive role in fostering peace in industrial relations. This analysis may well apply in other administrative contexts as well as, perhaps, provate arbitrations.  The Court holds:

[44]                          Common law and equitable doctrines emanate from the courts. But it hardly follows that arbitrators lack either the legal authority or the expertise required to adapt and apply them in a manner more appropriate to the arbitration of disputes and grievances in a labour relations context.

[45]                          On the contrary, labour arbitrators are authorized by their broad statutory and contractual mandates ― and well equipped by their expertise ― to adapt the legal and equitable doctrines they find relevant within the contained sphere of arbitral creativity. To this end, they may properly develop doctrines and fashion remedies appropriate in their field, drawing inspiration from general legal principles, the objectives and purposes of the statutory scheme, the principles of labour relations, the nature of the collective bargaining process, and the factual matrix of the grievances of which they are seized.

[46]                          This flows from the broad grant of authority vested in labour arbitrators by collective agreements and by statutes such as the LRA, which governs here.  Pursuant to s. 121 of the LRA, for example, arbitrators and arbitration boards must consider not only the collective agreement but also “the real substance of the matter in dispute between the parties”. They are “not bound by a strict legal interpretation of the matter in dispute”. And their awards “provide a final and conclusive settlement of the matter submitted to arbitration”.

[47]                          The broad mandate of arbitrators flows as well from their distinctive role in fostering peace in industrial relations (Toronto (City) Board of Education v. O.S.S.T.F., District 15, [1997] 1 S.C.R. 487, at para. 36; Parry Sound (District) Social Services Administration Board v. O.P.S.E.U., Local 324, 2003 SCC 42, [2003] 2 S.C.R. 157, at para. 17).

[48]                          Collective agreements govern the ongoing relationship between employers and their employees, as represented by their unions. When disputes arise — and they inevitably will — the collective agreement is expected to survive, at least until the next round of negotiations. The peaceful continuity of the relationship depends on a system of grievance arbitration that is sensitive to the immediate and long-term interests of both the employees and the employer.

[49]                          Labour arbitrators are uniquely placed to respond to the exigencies of the employer-employee relationship. But they require the flexibility to craft appropriate remedial doctrines when the need arises: Rigidity in the dispute resolution process risks not only the disintegration of the relationship, but also industrial discord.