Interest Dispute Arbitrations Cannot Just “Rubber Stamp” External Wage Parity

The City of Penticton found itself in difficult financial circumstances in 2014 when it came to negotiate a new collective agreement with the Penticton Fire Fighters Association. So much so that despite 98% or more of firefighters in the Province having already negotiated yearly wage increases, Penticton sought to negotiate lower wage increases than the established norm for its firefighters because of the particular circumstances that were affecting it. Unsurprisingly, this became a sticking point in negotiations and it proved to be one that the parties could not overcome on their own.

Consistent with the terms of the Fire and Police Services Collective Bargaining Act that governs bargaining of these key public services, the Minister issued a direction requiring that the dispute be resolved by arbitration. The process mandated by the Act involves a private arbitrator appointed by the parties conducting an interest dispute arbitration to determine the terms of the collective agreement that will bind the parties. This prevents the parties from engaging in a strike or lockout.

The principles that are traditionally followed in interest dispute arbitration involve what is known as the “replication theory”, in which the arbitrator attempts to work out what the parties would have agreed to had bargaining continued and the process not reached impasse. This is generally regarded as a conservative process in which major changes to the existing terms of a collective agreement are hard to achieve. The usual reference for determining wage increases and other such terms are completed contemporaneous agreements in the same or similar industries.

The parties appointed Arbitrator David McPhillips to conduct the arbitration and he issued his award in July 2015. Arbitrator McPhillips determined that the same wage increases that fire fighters had achieved elsewhere in the Province ought to be applied to Penticton.

The City believed that the Arbitrator had started from a presumption that external wage parity was appropriate and simply “rubber stamped” it without properly taking into account all the relevant evidence and factors requiring consideration as set out in the statute. On that basis, the City sought judicial review.

On April 29, 2016, Justice Bruce handed down her judgment dismissing the application for judicial review: Penticton (City) v. Penticton Fire Firefighters’ Association (International Association of Fire Fighters, Local 1399), 2016 BCSC 769. She concluded that, having regard to the high degree of deference owed to labour arbitrators, Arbitrator McPhillips’ award fell within the range of reasonable outcomes that were permissible. However, Justice Bruce did take the opportunity to caution interest dispute arbitrators against taking an approach insufficiently tailored to the circumstances confronting them:

“I understand the concerns raised by the City of Penticton that interest arbitrators not merely “rubber stamp” external wage parity in every case because this would stifle free collective bargaining and would never permit local economic concerns, regardless of how serious, to regulate or influence wage settlements. Why would the Association ever agree to something less than external wage parity if interest arbitration invariably led to the imposition of wage parity with other firefighter groups in the Province?…

An interest arbitrator who slavishly follows past arbitration awards without regard to the particular facts before him fetters his discretion and acts contrary to the statutory mandate in s. 4(6) of the [Fire and Police Services Collective Bargaining] Act. While past arbitration awards can be helpful guides, they are not binding on an interest arbitrator and cannot be considered in isolation from all the facts of the case.

It is apparent from Arbitrator McPhillips’ award that in many prior interest arbitrations involving firefighters, the wage increases negotiated by other unionized employees within the same employer’s operation have not been accorded significant weight. An arbitrator cannot rely on these past awards to justify his decision unless their underlying rationale applies to the facts of the case before him…”

While the employer was not successful in obtaining judicial review of Arbitrator McPhillips’ award in this instance, Justice Bruce’s comments above will be a useful authority for other employers to cite in the future. Seeking to persuade an interest dispute arbitrator to focus more on the individual circumstances affecting the employer and less on other agreements that may have been negotiated in the broader industry is always challenging. It will be somewhat easier in light of Justice Bruce’s cautionary comments.

Penticton (City) v. Penticton Fire Firefighters’ Association (International Association of Fire Fighters, Local 1399), 2016 BCSC 769

Questions relating to the content of this article are welcome to be directed to Don Jordan, Q.C.