DCN ARCHIVES

January 22, 2013

Split hairs and sector disputes

Operating as a unionized, construction contractor in Ontario means navigating a maze of overlapping, often barely comprehensible collective agreements and competing union work claims. Collective agreements reference multiple other collective agreements, each with their own work jurisdiction clauses, classifications, and unwritten area work practices. A recent decision by the Ontario Labour Relations Board (“Board”) has just made these considerations more treacherous and the process of costing innovative construction projects more difficult.

The Avery Decisions

Although sector disputes are not exactly commonplace, there was nothing ground-breaking about the Board’s Jan. 30, 2012 decision in a sector dispute between Avery Construction Limited Transportation Services (“Avery”), the Operating Engineers’ and the Labourers’ unions. The work in dispute formed part of the construction of a Landfill Gas Management System at the City of Sault Ste. Marie. Avery assigned all the disputed work to unionized trades. The fight was about Avery’s decision to perform much of the work under the respective sewer and watermain agreements, instead of under more expensive ICI provincial agreements. At the Board, Avery emphasized that over two thirds of the contract value involved the installation of below grade piping. The unions countered that there were no sewers, no watermains and no processing of water, potable or otherwise. Instead, the pipes were to be used to transport gas to a flaring station.

After the dust settled, the Board held that the work characteristics and end-use favoured a finding that the work fell within the ICI sector. After the sector dispute decision the unions revived several grievances which had been held in abeyance pending resolution of the sector dispute. In those grievances, the unions claimed damages for the difference between the sewer and watermain wage rates and the now retroactively applied ICI wage rates. Avery asserted that the sector analysis and applicable collective agreements were very complex and that it had not acted in bad faith. In a case of first impressions it made a tough call, albeit the wrong one. Avery asked the Board to apply the same reasoning to grievances arising on sector disputes as it does to those arising on jurisdictional disputes – not to award damages except where an has employer acted unreasonably or in bad faith.

In its decision on Nov. 27, 2012, the Board rejected Avery’s argument. In a jurisdictional dispute where there are competing, irreconcilable claims to work between two unions, an employer will inevitably violate one collective agreement if it follows the other. The Board held that in a typical sector dispute the employer is not faced with two competing, irreconcilable claims. Instead, it is simply faced with uncertainty as to which agreement to apply. Avery got it wrong and so it violated the ICI collective agreement and damages should follow. Citing earlier grievance caselaw (unrelated to sector disputes) the Board held that the situation should be treated no differently than any other inadvertent breach of a work rule, “where a violation of the collective agreement is established and there is an ascertainable loss that arises as a direct consequence of that violation, damages are properly awarded.

The Board does not assess whether the violation of the collective agreement was done deliberately, negligently, mistakenly, or inadvertently in good faith.” The decision in Avery is not subject to appeal. Although it has the power, the Board is unlikely to reconsider its own decision, and, given the nature of the decision, in an application for judicial review the Divisional Court would likely defer to the Board’s expertise. So Avery is likely to be the final word until the Board is faced with like circumstances again.

Post-Avery

The impact of the Board’s decision in Avery could be significant. Employers and general contractors often have significant pressure to bid jobs on tight deadlines. Post-Avery, employers have the following choices: seek agreement from all unions in advance of every bid, launch pre-emptive sector dispute applications at the Board before any work commences, apply the richer collective agreement out of an abundance of caution, or roll the dice.

This may reduce contractors’ ability to bid in a timely way, increase the cost of preparing bids, lead to labour relations unrest and increased litigation, and reduce unionized contractors’ ability to compete with non-union contractors in competitive bids. Even on union-only jobs, the winning bidder may be the one more willing to take the chance and bid under a lower-rate agreement, prompting litigation and forcing employees to wait for a decision on what they should have been paid. True — previously there was no rule that employers could avoid liability for mistakes in sector determinations by acting reasonably and in good faith. Practically speaking, this issue had not previously come to the fore; and so, apparently in error, many assumed such a common sense approach would govern.

But now, after Avery, there is no doubt. If you assign work to the right union but under the wrong collective agreement, even after careful consideration, reasonably and in good faith, you may have no defence to a compensatory damages claim. Obviously, the Board charted new territory when it first fashioned the good faith defence to damages arising in jurisdictional disputes. It did so for important policy reasons. Plainly, a sector dispute is not a jurisdictional dispute. But the Board let slip an opportunity to fashion a new test — one applicable to sector disputes. In the authors’ view, a sector dispute is more like a jurisdictional dispute than it is like a work rule grievance.

Particularly in borderline cases, even the Board must carefully assess and balance factors like bargaining patterns, work characteristics and end-use in order to determine the applicable sector, and it does so with ample time and a formal consultation process.

Going forward sector determinations are likely to become more common as technological change leads to more innovative construction projects. Penalizing employers that erroneously, but in good faith, apply the wrong collective agreements is not in the best interests of the industry or Province.

Jeff Murray and Jeremy Schwartz are both partners in the law firm Stringer LLP. They can be contacted at JMurray@stringerllp.com and JSchwartz@stringerllp.com. Comments can also be sent to editor@dailycommercialnews.com.

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