The Nova Scotia Court of Appeal in Halifax Shipyard, a Division of Irving Shipbuilding Inc. v. Local 1, Industrial Union of Marine and Shipbuilding (August 3, 2005, N.S.C.A.) reviewed the controversial issue of "specific penalty" provisions under collective agreements.
In this case, a number of employees were discharged for illegally stopping work at the shipyard. The employer took the position that the collective agreement contained a "specific penalty" and that the arbitrator was not at liberty to substitute a lesser penalty once the infraction had been proven.
In short, the agreement to a specific penalty for certain industrial infractions has the significant implication of removing the arbitrators ability to substitute a "lesser" penalty for that imposed by the employer. In effect, the parties to the collective agreement have agreed to the consequences that will follow certain conduct, and the arbitrator may not circumvent or otherwise "re-write" their agreement by substituting his or her views of the appropriate penalty.
For example the Ontario Labour Relations Act, 1995 (among others) provides as follows:
48(17) Where an arbitrator or arbitration board determines that an employee has been discharged or otherwise disciplined by an employer for cause and the collective agreement does not contain a specific penalty for the infraction that is the subject-matter of the arbitration, the arbitrator or arbitration board may substitute such other penalty for the discharge or discipline as to the arbitrator or arbitration board seems just and reasonable in all the circumstances.
Similar provisions are found in most other provincial legislation, including the Nova Scotia Trade Union Act. The Court of Appeal in Halifax Shipyard considered the language in the collective agreement and concluded that, in the circumstances, it did not contain a specific penalty. There were, essentially, two reasons given in support of this conclusion:
- There were a number of provisions in the agreement that the employer relied upon to support its position that a specific penalty existed. The Arbitrator and the Court found that Schedule "B" which listed a number of minor and major including "insubordination (willful disobedience to authority) was a specific penalty. Schedule "B" stated that “any employee committing any of the above offences will be liable to instant dismissal. The above list is illustrative and not exhaustive, however, any changes will be subject to negotiations between the Company and the Union.” The Arbitrator concluded that the employees had not been insubordinate as defined in this Schedule and, therefore, it did not apply. They turned to the provision that dealt with illegal work stoppages which provided that "Any employee or employees violating any of the provisions of this Article shall be subject to dismissal." The Arbitrator and court concluded that this was not a specific penalty. The Court also found support for this view from the fact that "illegal work stoppages" was not listed in Schedule "B".
- There were a number of cases relied on by the the Union where the arbitrators held "that penalty clauses using language such as “shall be subject to dismissal” that appears in Article 25.03 merely indicate that discharge may be imposed but do not specify that penalty: see, for example, Re Concrete Supplies of Windsor Inc. and Teamsters Union, Local 880 (1984), 14 L.A.C. (3d) 1 and Re Hibernia Employers’ Association Inc. and Newfoundland and Labrador Oil Development Allied Trades Council (1994), 43 L.A.C. (4th) 354 and the decisions reviewed therein."
The Court pointed out that there are a number cases that find that "shall be subject to dismissal" merely specifies a range of penalties. However, this analysis does not consider what appears to be a trend in the case law suggesting that a more "purposive" approach is required in determining whether a specific penalty clause exists.
In Re Hamilton Street R. Co. and A.T.U., Div. 107 (1971), 22 D.L.R. (3d) 658,  1 O.R. 270, the first case to discuss the matter, the collective agreement language before the court included the following clause:
Without limiting the generality of the foregoing it is expressly understood and agreed that reporting for work with an alcoholic breath ... shall conclusively be deemed to be sufficient cause for the dismissal of an employee ...
The arbitrator held that this language did not create a specific penalty, but Hughes J. quashed the arbitrator's award with the following observation [at pp. 662-3] :
"If the effect of s. 4.02, recognizing the right of management to dismiss for cause, taken together with s. 4.03, which says that reporting for work with an alcoholic breath is sufficient cause for dismissal, cannot be accepted as providing for a specific penalty, one is left with the unsatisfactory conclusion that nothing but a bald statement that discharge is mandatory in such a case can satisfy the subsection. I cannot believe that this was the intention of the Legislature in enacting it and it would be an unreasonable distortion of its terms to say that, where in any collective agreement it is provided that the penalty of discharge may be ameliorated by agreement between the conferring parties as provided in s. 10.03, the extreme penalty ceases to be specific. Nothing less than these two erroneous constructions of the collective agreement and the statute can justify the position taken by the majority of the arbitration board in this case and the award must be quashed."
A similar result on similar language was reached by the British Columbia Court of Appeal in Valley Rite-Mix Ltd. v. Teamsters Local Union 213,  1 W.W.R. 685, and by the Ontario Divisional Court in Re Colonial Cookies, Div. of Beatrice Int'l (Canada) Ltd. and U.F.C.W. Loc. 617P (1986), 33 D.L.R. (4th) 634, 57 O.R. (2d) 464.
The Supreme Court of Canada has also got in on the debate in two cases: Dairy Producers Co-Operative Ltd. v. Lyons  1 S.C.R. 338 and General Drivers, Warehousemen & Helpers Union, Loc. 979 v. Brink's Canada Ltd.  1 S.C.R. 382.
The Ontario courts have considered the issue in the context of judicial review proceedings of Frito-Lay Canada Ltd. (1975), 10 L.A.C. (2d) 234 (Beatty) (see: Frito-Lay Canada Ltd. August 10, 1976 Ont. Div. Ct and Frito-Lay Canada Ltd. 77 C.L.L.C. (para)14,061, Ont. C.A.).
There are many more cases, but the criteria in Brinks for establishing that a provision is a specific penalty provision have been widely applied in subsequent cases, along with a purposive analysis.
So, while I understand the reasoning of the Court of Appeal in Halifax Shipyard, I would have liked them to have considered in a more fulsome way, the growing body of caselaw involving specific penalties before concluding that the clause before them fell short.