In a recent Ottawa case, Ottawa (City) v. Girard, 2012 ONSC 7256, the Ontario Superior Court allowed the employer to proceed with a lawsuit seeking recovery of $48,000 from a recently dismissed employee.
After terminating the employment of the employee, the employer discovered an error in salary payment. As a result of a previous disciplinary action, a Memorandum of Agreement had been signed that red-circled the employee. However, the employee continued to receive salary increases inadvertently.
The employee grieved his termination of employment and the grievance was referred to arbitration. The union refused to allow the employer to refer the issue of overpayment to the arbitrator. As stated in the judgment (at para. 6):
In the meanwhile, the Union stated that such a grievance by the employer was unrelated factually and legally to the termination issue; further it was said to be “outside the time limits” of the Collective Agreement; and, in any case, was “not a claim over which an Arbitrator has jurisdiction under the terms of the Collective Agreement.” Thus, they refused to consent for the overpayment issue to be dealt with by the arbitrator at the same time as the termination issue.
The arbitration was scheduled, but the grievor failed to attend (a new date for the hearing has been scheduled). The employer then filed its claim against the former employee. The former employee brought a motion to dismiss the lawsuit on the basis that the jurisdiction of the court was ousted because the dispute arose out of the collective agreement.
The court recognized that where it is clear that a dispute arises from a collective agreement, a labour arbitrator has exclusive jurisdiction:
[26] I agree with the principles set out by the moving party with respect to the jurisprudential emphasis on the exclusive jurisdiction of the grievance and arbitration proceedings in cases where parties to a Collective Agreement have a dispute relating to that Collective Agreement. Continuing disagreements between the employer and employee need to be dealt with in accordance with the specific legislation concerning labour law.
However, the court noted the following facts or issues that warranted maintaining the court’s jurisdiction:
- Mr. Girard is no longer an employee.
- He is no longer a party to, nor governed by, the Collective Agreement.
- The Memorandum of Agreement was not incorporated in any way into the Collective Agreement.
- The Union takes the position that the City’s claim is “not a claim over which Arbitration has jurisdiction under the terms of the Collective Agreement.”
- Mr. Girard has failed to attend at previous arbitration dates and his co-operation in even that process is questionable.
- While the courts can order the repayment of money paid by reason of mistake of fact, an arbitrator could not do so.
The court determined that the employer would be without remedial recourse if the court’s jurisdiction was ousted. The court distinguished Weber v. Ontario Hydro, 1995 CanLII 108 (SCC) on the basis that the employee was still employed in that case.
The court in this case seems to have based its decision, in part, on the positions of the parties that the arbitrator had no jurisdiction over the overpayment. The employer’s initial position was that an arbitrator had jurisdiction (it attempted to have the arbitrator deal with the issue). The arbitrator made no ruling on his or her jurisdiction.
Arbitrators routinely exercise jurisdiction over memoranda of agreements relating to discipline (last-chance agreements, for example) even if they are not part of the collective agreement.
Since the parties to a collective agreement are the union and the employer, it is not clear why the participation of the grievor in the hearing is a relevant factor. In any event, the hearing was rescheduled and there was no evidence that he would not be in attendance.
At least one arbitrator has opined on the appropriate avenue for an employer wishing to recover an overpayment based on mistake of fact:
It is clear from the judicial and arbitral jurisprudence following from the Supreme Court of Canada’s decision in Weber v. Ontario Hydro, 1995 CanLII 108 (SCC), [1995] 2 S.C.R. 929, and that Court’s decision in Parry Sound (District) Social Services Administration Board v. O.P.S.E.U., Local 324 2003 SCC 42 (CanLII), [2003] 2 S.C.R. 157, that the recovery vehicle for employment-related claims by or against an employee covered by a collective agreement is the grievance and arbitration procedure in that collective agreement.
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And it is at arbitration, not at the unilateral instance of the Hospital, that common law principles (such as mistake of fact or of law) may come into play when an employer seeks to recover an alleged overpayment.
In the end, the best reason for allowing the court to proceed with the claim may be that the defendant is no longer under the collective agreement. However, that is prejudging the outcome of the discharge grievance.