Interest Arbitration | Cole Labour

Interest Arbitration in Canada

No. 1, Spring 2024

Welcome to the first edition of Interest Arbitration in Canada. This newsletter is a natural companion to COLE LABOUR newsletters covering police, firefighter, and paramedic collective bargaining and should be of interest to many in the broader health care sector, where interest arbitration is the default system to resolve collective bargaining disputes. Interest arbitration is considered an acceptable alternative to the right to strike or lockout in those sectors, where the potential harm to public safety outweighs the strategic use of economic sanctions in pursuit of more favourable negotiation outcomes. Just as experienced negotiators understand how the threat of a strike or lockout can shape negotiations, those working in a compulsory interest arbitration environment must also develop a deep understanding of interest arbitration’s unique characteristics and how they may influence negotiation preparation, priority setting and decision-making.

If you have participated in any of our advanced collective bargaining courses, you will recall how much emphasis we place on environmental awareness and its potential impact on collective bargaining. It is only natural then that negotiators who are required to resolve collective bargaining differences through compulsory (or consensual) arbitration understand the intersection between complex strategic considerations in negotiations and the dispute resolution system you will be subject to in the event of impasse.

The newsletter will draw upon COLE LABOUR’s extensive interest arbitration decision archive which stretches back to the 1960’s. The history of interest arbitration is often helpful in explaining how this conservative, cautious process has evolved and applies today. From time to time, we will analyze key decisions from across Canada, examining the arbitral principles applied and the impact these decisions may have across specific sectors. The many principles that interest arbitrators rely on are common in all Canadian jurisdictions – therefore a case involving first responders in one province will be informative for those working many provinces away.

I hope you find this first newsletter informative and useful. If you think others would find this or any of our newsletters interesting, please pass them along.

Interest Arbitration – What is it?

This is a broad question and invites several different answers – but fundamentally interest arbitration is an administrative process where an arbitrator, or board of arbitrators (comprised of a neutral chairperson and one nominee appointed by each of the employer and union) oversee a dispute resolution process, most often involving mediation, arbitration, or some combination of the two. In doing so the arbitrator, or board, receive submissions from the parties which represents the “evidence” each side relies upon in support of their collective bargaining proposals. The process expects that each side will have equal opportunities to argue in favour of their positions, and against the positions of the other side.

Once the evidence is received by the arbitrator or board, it is evaluated against several traditional decision-making factors. In many Canadian provinces arbitrators may be required to consider statutory decision-making criteria. While initially championed as limitations on arbitral decision making, in practical terms statutory criteria have not displaced, nor have any greater bearing on the decision-making factors that arbitrators have applied for decades (we will consider criteria in greater detail in future editions of this newsletter). For this newsletter I want to take a more generalized view of how interest arbitration evidence is considered.

The First Principle - Replication

One of the first principles of interest arbitration is the replication of the collective bargaining environment in place at the time of the dispute. By examining the outcome of freely negotiated or arbitrated decisions covering the same workers in similar work environments, interest arbitrators assess what the parties may have achieved had their bargaining efforts not resulted in an impasse. As an Ontario arbitrator recently observed in a health care sector case:

The interest arbitration process is not a judicial or adjudicative process guided by one’s personal sense of fairness or social justice. Interest arbitrators (or arbitration boards) do not implement social policy and it is not their task to determine government funding. As stated by Arbitrator Martin Teplitsky Q.C. in his August 31, 1982, award between SEIU and a Group of 46 Participating Hospitals, “Interest arbitrators attempt to emulate the results of free collective bargaining…Interest arbitrators interpret the collective bargaining scene. They do not sit in judgment of its results.” The collective bargaining scene includes both comparable settlements and awards, which are themselves based on relevant comparators.[1]

The replication principle in arbitral decision making should influence a negotiator’s expectations of what can be achieved at interest arbitration. When considering arbitration as a necessary step in concluding collective agreement, negotiators should be mindful of what interest arbitration is not – issue adjudication. By adjudication we mean a process where the merits of each individual proposal put to the arbitrator/board is evaluated solely on its merits, absent a consideration of the totality of the change in a single round of negotiations.

Arbitrator Paul Weiler, an important voice in the evolution of interest arbitration in Canada, considered this question in another health care sector case:

I have always thought it is essential not to look at any item in isolation. With rare exceptions any such proposed improvement looks plausible on its face. The Union can point to some number of bargaining relationships where this point has already been conceded. It may even be true that, taken one by one, no single revision will actually cost that much. But cumulatively, these changes can mount up substantially. Thus, sophisticated parties in free collective bargaining look upon their settlement as a total compensation package, in which all the improvements are costed out and fitted within the global percentage increase which is deemed to be fair to the employees and sound for their employer that year.[2]

Likewise, in a case from Atlantic Canada, an arbitrator noted how replication could be informed by knowledge received from the parties while in mediation, which contributed to the arbitral outcome. The arbitrator stated:

The principle of replication is not new to interest arbitration. By working through the process of mediation, as mandated by the Act, we became acquainted with the details of the bargaining history between these parties. We came to know the proposals and counter--proposals which were made and the reasons behind them. We were able to explore the facts that motivated their movements. Thus we came to know and consider the general economic conditions, settlements that have been made in the public and private sectors, the enhancements which the employer proposed, and in some instances implemented, with the agreement of the Union, the problems associated with the development of more appropriate classifications with accompanying levels of compensation, that which each of EMC and the Union hoped to achieve through the bargaining process, and the list goes on.[3]

Finally, an Ontario arbitrator made the following comments in an interest arbitration involving municipal workers in Ottawa. He noted that replication was a process that also looked carefully at how the disputing parties resolved their own collective bargaining issues in the past. The arbitrator concluded that:

The job of a Board of Interest Arbitration is to do the best it can to replicate free collective bargaining: to come up with a settlement that the parties would have reached had collective bargaining followed its natural course and come to a conclusion with a collective agreement. In doing so, Boards of Interest Arbitration are guided by many criteria, most notably replication: the replication, whenever possible, of free collective bargaining outcomes. One of the preferred methods of deciding interest disputes is to look at what the parties themselves have done: their previous pattern of settlement. Arguably, this provides the very best evidence of what free collective bargaining would achieve. Here, a bargaining pattern exists: the evidence is incontrovertible that for sixteen years this union, and the one representing the employer’s inside and outside workers, have moved lockstep in wage increases with only immaterial deviations.[4]

Replication Exceptions

Despite the weight of the replication principle in the assessment of bargaining positions, arbitrators are not locked into or limited to assessing the merits of a party’s proposal based only on what exists in other collective agreements. While arbitrators seem more comfortable with normative outcomes in comparable working environments, there can be circumstances where the evidence supporting a novel bargaining position may persuade an arbitrator to award breakthrough language. Recent awards that provide non-normative compensation intended to offset persistent inflation are an example of exceptions to the narrow application of replication principles (see COLE LABOUR collective bargaining newsletters from 2023 for more information on inflation offsets at arbitration).

Summary

Interest arbitration as a process seeks to provide both the employer and the union with a fair outcome in an environment where strikes or lockouts are not possible. Arbitrators may not be able to resolve each issue on the table, but overall seek a solution that could have been foreseen through a free and fair negotiation process. Negotiators in sectors that rely on interest arbitration should consider these arbitration principles, and how to shape the bargaining process to support more favourable outcomes.

This first newsletter on interest arbitration opens a window to this complex process. Look for future editions on this topic, and all the COLE LABOUR newsletters, in support of your collective bargaining or organizational development interests.

[1] Participating Nursing Homes and SEIU, 2022 CanLII 90597 (ON LA) (Stout) p.11.

[2] Service Employees International Union and 45 Participating Hospitals, (unreported) (Weiler) 1981,

[3] EMC Emergency Medical Care and NSGEU, (unreported) January 19, 2000, Clark (p. 10)

[4] City of Ottawa and Civic Institute of Professional Personnel, 2022 CanLII 6819 (ON LA), Kaplan, (p. 6)