Canada (Attorney General) v. Social Science Employees Association, 2004 FCA 165

Date: 20040426

Docket: A-691-02

Citation: 2004 FCA 165

CORAM:        LÉTOURNEAU J.A.

NADON J.A.

PELLETIER J.A.

BETWEEN:

                                             ATTORNEY GENERAL OF CANADA

                                                                                                                                            Applicant

                                                                           and

                                   SOCIAL SCIENCE EMPLOYEES ASSOCIATION

                                                                                                                                        Respondent

                                                                           and

            CANADIAN UNION OF PROFESSIONAL AND TECHNICAL EMPLOYEES

                                                                                                                                        Respondent

                                        Heard at Ottawa, Ontario, on December 9, 2003.

                                  Judgment delivered at Ottawa, Ontario, on April 26, 2004.

REASONS FOR JUDGMENT BY:                                                                                NADON J.A.

CONCURRED IN BY:                                                                                        LÉTOURNEAU J.A.

                                                                                                                                 PELLETIER J.A.

Date: 20040426

Docket: A-691-02

Citation: 2004 FCA 165

CORAM:        LÉTOURNEAU J.A.

NADON J.A.

PELLETIER J.A.

BETWEEN:

                                             ATTORNEY GENERAL OF CANADA

                                                                                                                                            Applicant

                                                                           and

                                   SOCIAL SCIENCE EMPLOYEES ASSOCIATION

                                                                                                                                        Respondent

                                                                           and

            CANADIAN UNION OF PROFESSIONAL AND TECHNICAL EMPLOYEES

                                                                                                                                        Respondent

                                                    REASONS FOR JUDGMENT

NADON J.A.

[1]                This is an application by the Attorney General of Canada (the "applicant") for judicial review of a decision made by the Public Service Staff Relations Board (the "Board") on November 22, 2002.

[2]                At issue is whether the Board erred in concluding that two unfair labour practice complaints brought by the respondent unions, pursuant to section 23 of the Public Service Staff Relations Act, R.S. (1985), ch. P-35 (the "Act"), against the Secretary of the Treasury Board and Tom Smith, Director of pay administration in the Labour Relations division of the Human Resources branch of the Treasury Board ("Treasury Board") were well founded.

[3]                By their complaints, the respondents alleged that Treasury Board had discriminated against their members by reason of their membership in the unions, contrary to sections 8 and 9 of the Act. Specifically, the respondents alleged that between 1998 and 2002, Treasury Board gave preferential treatment to its excluded and unrepresented employees (the "non-unionized employees") in respect of the implementation of retroactive salary revisions. The respondents say that their complaints result from Treasury Board's decision to change the way in which it calculated salaries for persons promoted, deployed or transferred during the period subject to the retroactive application of a renewed collective agreement.

Background

[4]                The litigation stems from the fact that collective agreements are often signed after the expiry date of the previous agreement. Although expired, the previous agreement, by reason of section 52 of the Act, continues to apply until such time as a new agreement is concluded. From that point on, the new agreement applies retroactively to the date of expiry of the previous agreement.

[5]                One of the effects of the retroactive application of a new agreement is that wages must be recalculated as if the new agreement had come into force immediately after the expiry of the previous agreement. Thus, a retroactive calculation must be made so as to determine the difference between the wages paid under the previous agreement and the wages which ought to have been paid if the new agreement had come into force immediately after the expiry of the former agreement.

[6]                The matter becomes more complex in the case of employees who are appointed to new positions during the period subject to the retroactive application of the new agreement. The complexity comes from the fact that the appointee usually leaves a position with rates of pay which are different from those of the position to which he or she has been appointed, and the person's wages in the new position will depend on the wages in his or her former position.

[7]                Consequently, by reason of the coming into force of a new agreement and its retroactive application, the wages of the former position and of the new position may have to be modified in order to attempt to place the employee in the situation in which he or she would have been had there not been a void between the previous and new agreements.

[8]                Prior to the decision of this Court in Canada v. Lajoie, [1992] 14 N.R. 233, which I deal with in greater detail at paragraphs 13 and following of these Reasons, when an employee was promoted, transferred or demoted during the period subject to retroactive application of the new agreement, his or her wages were recalculated whenever the new agreement provided for retroactive application of wage increases. Such a recalculation would result in either an increase or a decrease in the rate of pay of the employee (See paragraphs 15 and 16 below for an illustration of the calculation initially done by Treasury Board in the case of Mr. Lajoie).

[9]                I should point out that the provisions of Treasury Board's Terms and Conditions of Employment Policy (eff. Sept.1/90) (the "Policy") apply to all of the government's excluded and unrepresented employees and also apply, by way of incorporation into the collective agreements negotiated by the various unions and Treasury Board, to unionized employees.

[10]            Sections 24 to 26 of the Policy deal with the rates of pay on promotion, demotion or transfer by appointment. Section 27 deals with the appointment or deployment on pay increment date. These provisions read as follows:

Rate of pay on promotion

24.(1) The appointment of an employee described in Section 23 constitutes a promotion where the maximum rate of pay applicable to the position to which that person is appointed exceeds the maximum rate of pay applicable to the employee's substantive level immediately before that appointment by:

(a) an amount equal to at least the lowest pay increment for the position to which he or she is appointed, where that position has more than one rate of pay; or

(b) an amount equal to at least four per cent of the maximum rate of pay for the position held by the employee immediately prior to that appointment, where the position to which he or she is appointed has only one rate of pay.

24.(2) Subject to Sections 27 and 28, on promotion, the rate of pay shall be the rate of pay nearest that to which the employee was entitled in his or her substantive level immediately before the appointment that gives the employee an increase in pay as specified in subsection (1) above; or an amount equal to at least four per cent of the maximum rate of pay for the position to which he or she is appointed, where the salary for the position to which the appointment is made is governed by performance pay.

Rate of pay on demotion

25.(1) A person is demoted where pursuant to Section 50(A), he or she is appointed to a position to which these regulations apply that has a lower maximum rate of pay than the maximum rate applicable to the employee's former substantive level.

25.(2) Subject to Sections 27 and 28, where a person described in Section 23 is demoted, he or she shall be paid the rate of pay that is nearest to but not more than the rate of pay the employee was entitled to in his or her substantive level immediately before the appointment.

Rate of pay on deployment or transfer by appointment

26.(1) A person described in Section 23 is deployed or transferred by appointment where the deployment or appointment to a position to which these regulations apply does not constitute a promotion or demotion.

26.(2) Subject to Sections 27 and 28, where the appointment constitutes a deployment or transfer by appointment, the employee shall be paid the rate of pay that is nearest to but not less than the rate of pay the employee was entitled to in his or her substantive level immediately before the deployment or appointment, or if there is no such rate, at the maximum rate of pay for the position to which he or she is deployed or appointed.

26.(3) Where a person employed in Part I Service is deployed or transferred by appointment during the probationary period to a position to which these regulations apply, the employee shall be paid in the new position at the rate he or she would be receiving in that position if deployed or appointed to it on the date of deployment or appointment to his or her former substantive level position.

Appointment or deployment on pay increment date

27. Where an employee is promoted, deployed or transferred by appointment on the day on which a pay increment would otherwise have become due, the employee's rate of pay in that position on the day immediately before the appointment or deployment shall be deemed to have been the rate of pay that he or she would have received if the pay increment had become due on that date.

[11]            The relevant provisions of the agreement between Treasury Board and the respondent, the Social Science Employees Association, are sections 27.01, 27.03 and 27.04, which provide as follows:

AGREEMENT:

27.01 Except as provided in this Article, the terms and conditions governing the application of pay to employees are not affected by this Agreement.

[...]

27.03

(a)            The rates of pay set forth in Appendix "A" shall become effective on the dates specified therein.

(b)           Where the rates of pay set forth in Appendix "A" have an effective date prior to the signing of the collective agreement the following shall apply:

(I)            "retroactive period" for the purpose of clauses (ii) to (v) means the period commencing on the effective date of the retroactive upward revision in rates of pay and ending on the date the collective agreement is signed or when an arbitral award is rendered therefor;

(ii)           a retroactive upward revision in rates of pay shall apply to employees, former employees or in the case of death the estates of former employees, who were employees in the bargaining unit during the retroactive period;

(iii)          rates of pay shall be paid in an amount equal to what would have been paid had the collective agreement been signed or an arbitral award rendered therefor on the effective date of the revision in rates of pay;

27.04       Where a pay increment and a pay revision are effected on the same date, the pay increment shall be applied first and the resulting rate shall be revised in accordance with the pay revision.

[...]

                                                                                                                   (Emphasis added)

It should be noted that the collective agreement between Treasury Board and the other respondent, the Canadian Union of Professional and Technical Employees, contains similar provisions.

[12]            I have reproduced the relevant provisions of the Regulations and of the collective agreements simply to highlight the complexity of the recalculation and the difficulties which may arise in any given case.

The Lajoie Decision

[13]            I now come to this Court's decision in Lajoie, supra, which is at the heart of the litigation between the parties.

[14]            Not satisfied with the results yielded by the method by which his wages had been recalculated, a unionized employee, Jacques Lajoie, filed grievances in respect of the calculation by his employer of the retroactive salary adjustment to which he was entitled following the conclusion of a new collective agreement.

[15]            At issue before the adjudicator was the retroactive application of the new agreement to Mr. Lajoie's new position. The factual situation was as follows. Mr. Lajoie was promoted on July 29, 1987, to a position classified as AU-02, and his annual salary was set at $38,377, which salary was at the second level of the AU-02 salary scale. Before his promotion, Mr. Lajoie held a position classified as PM-03, and was receiving a salary of $36,534. On August 1, 1988, Mr. Lajoie was transferred to a bilingual position AU-02, and his salary was fixed at $39,697, which salary was at the third level of the AU-02 salary scale. At the time of Mr. Lajoie's promotion, i.e. July 29, 1987, the collective agreement which had formally governed the conditions of employment of those holding AU positions had been expired since April 20, 1987.    On August 18, 1988, a new collective agreement was concluded between Treasury Board and the bargaining agent, which provided for the AU-02 group retroactive pay increases in two stages, namely to April 21, 1987 and May 21, 1988.

[16]            As appears from the facts, Mr. Lajoie was appointed to a new position with a rate of pay which corresponded to the second level of the salary scale for that position. As a result of the retroactive application of the new agreement, his new rate of pay was recalculated by the employer to the first level of the position's salary scale. Hence, both his rate of pay and his future prospects were affected.

[17]            Mr. Lajoie's grievances were successful (See Lajoie v. Treasury Board (1991), CRTFPC 203) and the Attorney General, by way of a judicial review application, sought to set aside the adjudicator's decision. By decision dated November 10, 1992, this Court, in Lajoie, supra, upheld the adjudicator's decision, which rejected the employer's method of recalculation, substituting thereto an approach that resulted in a greater benefit to Mr. Lajoie. At pages 231 and 232 (paragraphs 11 and 12), Hugessen J., for the Court, sets out the nature of the dispute between the contending parties:

[11]         The dispute between the parties concerns the effect of these provisions [of the collective agreement] and the application of the Public Service Employment Regulations, cited above. The employer argues that once the new collective agreement had been signed the whole matter had to be reopened, first to determine whether the respondent's appointment dated July 29, 1987 was still a promotion, and second to recalculate the increments to which he was entitled at the time of the appointment and at the time of the transfer a year later. According to the employer this calculation places the respondent at the first level of the AU-02 group on July 29, 1987, entitled him to pay of $38,528 (column 1, line B of the grid). Thereafter, the employer contended, the employee was entitled to an increase to $39,973 on May 1, 1988 (column 1, line D) and was finally transferred on August 1, 1988 to the second level with a salary of $41,389 (column 2, line D).

[12]         The employee saw things differently. In his submission, he was appointed on July 29, 1987 to a position in the AU-02 level with a salary of $38,377. For purposes of calculating the retroactive pay, that appointment and the salary attached to it placed him squarely at the starting-point found in column 2 of the first line of the grid ("From: $...38377..."). On that basis, he is entitled to salary of $39,983 for the entire period from April 21, 1987 up to May 21, 1988, when his salary rose to $41,389 (lines B and D of column 2). Finally, his transfer to the third level on August 1, 1988 entitled to a salary of $42,812 (column 3, line D).

                                                                                                                   (Emphasis added)

[18]            At pages 232 to 235 (paras. 14 and 17 to 19), after carefully reviewing the relevant provisions of the collective agreement and of the Policy, Hugessen J. makes the following remarks:

[14]         Firstly, I find it hard to read ss. 65 and 66 of the Regulations as allowing retroactive revision of all the consequences of an appointment every time a collective agreement gives employees retroactive salary increases. In my opinion, s. 65 should be read as enabling both employer and employee to know at once whether a new appointment is a promotion (s. 65(1)), a demotion (s. 65(2)) or simply a transfer (s. 65(3)). It seems to me that any other conclusion would lead to utter confusion: an employer who believed he had disciplined an employee for incompetence by demoting him would realize two years later that as the result of retroactive pay he had actually given the employee a transfer or even a promotion; on the other hand, an employee who enthusiastically accepted what seemed to him to be a promotion would two years later, to his great disappointment, find it was actually a demotion.

[...]

[17]         Further, there is nothing in the applicable legislation which imposes the result sought by the government. On the contrary, clause 27.03(c)(iii) of the agreement indicates that the retroactive revision of pay is a contractual fiction which requires that certain amounts be paid as salary as if the agreement had been signed at an earlier date. According to the text itself, this fiction applies only to payments, not to the other aspects of relations between the employer and its employees. In other words, the agreement speaks of an action which the employer undertakes to perform in the future; it does not change what has already happened in the past. The appointment to a position and a level is not altered by a payment that the employer undertakes to make on the basis of an assumption which he recognizes is contrary to the reality.

[18]         Finally, clause 27.04 appears to enshrine the principle that account must first be taken of any possible alteration of the level before passing on to the revision of level. The same rule is also reflected in s. 66(3) of the Regulations. The starting point of any salary review is the present salary level; in the case of a new appointment that level is necessarily fixed at the time the appointment is offered by the employer and accepted by the employee.

[19]          In short, for the respondent the salary review took place on July 29, 1987, the date of his appointment to the AU-02 position. To calculate that review it must be determined what salary he was in fact receiving on that date. For him, as for all the other members of his bargaining unit, it clearly was the salary established under the old collective agreement. For him, as for all the others, the agreement continued to be in effect. Under that agreement, the respondent was receiving on July 29, 1987 an annual salary of $38,377, and his new rate of pay must be calculated on the basis of that figure.

                                                                                                                   (Emphasis added)

[19]            The parties are not agreed as to the significance of Lajoie. I will return to this. However, this is the appropriate time to reproduce paragraphs 15 and 18 of the Board's decision, where it explains the difference between the pre-Lajoie method of recalculation and the method applied by Treasury Board on the basis of the Lajoie decision:

[15]         The SSEA [the respondent Social Science Employees Association] assumed the back pay was always calculated, as in the past, consistent with subparagraph 27.03(b)(iii) [of the collective agreement] which involved going back in time and applying the new rates of pay when effective for the recalculation of pay rates upon promotion or reclassification or when acting in a higher position, known as the "standard recalculation method".

[...]

[18]         The Lajoie application meant that there was no reconstruction of an employee's history of promotion, reclassification or acting appointments. For the vast majority of employees this resulted in lesser amounts of retroactive pay and lesser amounts of current and ongoing salary and/or lower increment position on the pay scale.

[20]            I should point out that the relevant provisions of the Policy and of the Agreement between Treasury Board and the union before this Court in Lajoie were, for all intents and purposes, identical to the provisions relevant to the present matter.

Post-Lajoie

[21]            In 1997, after a wage freeze of five years, collective bargaining resumed in the Public Service. Since then, the government has concluded three collective agreements with the respondent unions. During the negotiations which led to the signing of these agreements, neither the Lajoie decision nor its implications regarding the proper method of calculating retroactive wage increases were discussed.

[22]            During the period of application of the first collective agreement between Treasury Board and the respondents, the Lajoie method was not applied by Treasury Board, apparently because those in charge of paying wages were either unaware of or forgot the Lajoie decision. However, commencing with the second collective agreement, the employer began to apply the Lajoie decision whenever retroactive calculations of wage increases had to be made.

[23]            During the hearing before the Board, a January 31, 2001 Treasury Board information bulletin addressed to compensation managers/chiefs of staff relations was adduced in evidence as Exhibit S-2. In this document, Treasury Board purported to provide clarification to its managers with respect to the application of the Lajoie decision. The document reads as follows:

DATE: January 31, 2001

TO:          Compensation Managers / Chiefs of Staff Relations

SUBJECT:    Lajoie Decision

The purpose of this bulletin is to provide clarification regarding the application of the Lajoie decision (Federal Court of Appeal Decision 149 N.R. 223) when implementing retroactive salary revisions.

In accordance with the Lajoie Decision, rates of pay resulting from promotions, transfers, deployments, or acting situations are not recalculated during the retroactive period of a pay rate scale revision. The new rate of pay to be implemented is the one immediately below the former rate of pay being revised. This applies to all retroactive revisions to rates at pay paid to represented employees.

In a Treasury Board bulletin dated November 8, 2000, entitled Economic Increase for Excluded and Unrepresented PE, OM, CA and MM Groups, you were advised that where implementing retroactive rate of pay revisions applicable to excluded or unrepresented employees the Lajoie Decision is applied and a recalculation is done. The excluded or unrepresented employees then benefit from the better of the two resulting revised rates of pay.

When trying to determine which of the above is applicable when a represented employee is promoted, deployed, transferred, or acting in an excluded or unrepresented position, or when an excluded or unrepresented employee is promoted, deployed, transferred or acting in a represented position, the terms and conditions of the higher level position apply. The Lajoie Decision only is applied when the higher position is represented, and the Lajoie Decision or better is applied when the higher level position is excluded or unrepresented.

Please note that wording in certain collective agreements, such as that found in the current Electronics Group (EL) agreement (i.e., "Acting pay will be recalculated as the result of any pay increment or any change to the range of rates in the employee's substantive position or any change to the range of rates in the higher position") does not negate the Lajoie Decision which is still applied to the retroactive portion of the pay rate revisions. Recalculations are performed only when pay rate changes are effective on a date which is after the collective agreement signing date.

Various examples illustrating the above are attached for your reference.

Departmental Compensation managers should direct any questions that they may have regarding this bulletin to their corporate Compensation officials who, if need be, can contact the Pay Administration Section for represented employees, or the Executive and Excluded Groups for excluded or unrepresented employees.

Tom Smith

Director, Pay Administration - Labour Relations Division - Human Resources Branch

                                                                                                                   (Emphasis added)

[24]            As appears from the above document, reference is made to a Treasury Board bulletin dated November 8, 2000, in which Treasury Board had informed its heads of Human Resources that non-unionized employees who were promoted, transferred or deployed during a period subject to the retroactive application of wage increases, were to be paid in accordance with the method which had been dictated by this Court in Lajoie, "except where such treatment provides a lesser benefit than that accruing to the employee following a recalculation of the promotion, transfer, deploying or acting rate of pay...". The relevant part of this bulletin reads as follow:

The Treasury Board also authorise that, with respect to the retroactive application of revised rates of pay, for all excluded and unrepresented employees (including Executives), who were promoted, transferred, or deployed, or who commenced acting pay during the retroactive period, be paid in accordance with the provisions of the Lajoie decision (Federal Court of Appeal decision 149 N.R. 223), except where such treatment provides a lesser benefit than that accruing to the employee following a recalculation of the promotion, transfer, deployment, or acting rate of pay. Examples of how to apply Lajoie or better treatment have been provided in Annex "E".

This document was produced before the Board as Exhibit S-3.

[25]            In August and September 2001, the respondents received a number of reports from their members that the manner in which their employer determined their retroactive pay resulting from promotion or acting situations appeared to be arbitrary. In October 2001, the respondents became aware of Exhibit S-2. Hence, the complaints which have given rise to this judicial review application.

[26]            To complete the facts, I should point out that since March 6, 2002, Treasury Board applies Lajoie to all of its employees, unionized and non-unionized.

Legislation

[27]            The relevant provisions of the Act read as follows:

[28]            Subsection 7(1) and 11(2) of the Financial Administration Act, R.S. (1985), c. F-11, are also relevant:

The Board's Decision

[29]            Although the Board's decision is 80 pages long and comprises 100 paragraphs, very few of these paragraphs provide any analysis in support of the conclusion reached by the Board. Paragraphs 86 to 94, which constitute the Board's rationale for concluding as it does, are sketchy at best and can only be characterized as providing a circular line of reasoning:

[86]         The issue I have to determine is whether Frank Claydon, Tom Smith and the Treasury Board Secretariat are in violation of the PSSRA when the employer applied its policy as set out in Exhibits S-2 (C-4) and S-3) (C-5) to employees represented by the SSEA and the CUPTE.

[87]         Exhibit S-2 reads: [Note: Exhibit reproduced at paragraph 21 of these Reasons]

[88]         Exhibit S-2 on its face discriminates between represented and unrepresented employees.

[89]         The evidence has revealed that in the case of a restructuring of pay scales the application of the Lajoie decision as understood by the employer has a negative impact upon employees. Therefore the application of the Lajoie decision only to represented employees and the Lajoie decision or better to unrepresented and excluded employees is discriminatory.

[90]         While it is possible for the employer to negotiate collective agreements with terms and conditions that are different from those it has set for excluded and unrepresented employees, those terms must be negotiated for the represented employees and there must be a legitimate business reason to grant the terms to the excluded and unrepresented employees.

[91]         The evidence here reveals that the application of the Lajoie decision to employees in bargaining units represented by the SSEA and the CUPTE was not discussed during the negotiation of their respective collective agreements. It cannot be said that the application of the Lajoie decision was a negotiated term or condition of employment. No valid reason was provided to explain why the Lajoie decision would apply to unrepresented employees only if it provided a greater benefit than the recalculation method while it would apply to represented employees no matter what the outcome was for them.

[92]         The evidence of the respondents was that the Lajoie decision was a decision of the Federal Court of Appeal and that bargaining agents had the responsibility of knowing of its existence and its application to them even if they were not a party to it. A conscious decision was made by the employer not to raise the Lajoie decision during negotiations. The application of the principles enunciated in the Lajoie decision was to be discussed only if the issue was raised by the bargaining agents. This falls short of establishing that the application of the Lajoie decision to employees in bargaining units represented by the SSEA and the CUPTE was a negotiated term or condition of employment. Even if it could be implied that it was, there were no explanation provided to justify that the Lajoie decision would not apply to excluded ESs and TRs and unrepresented employees unless it provided a greater benefit than the recalculation method which the SSEA and the CUPTE believed they had renewed in their collective agreements.

[93]         As the respondents and the employer have provided no legitimate business reason, or justification, for the distinction in the treatment of represented and unrepresented employees, the discrimination is therefore contrary to the PSSRA since it discriminates against employees in bargaining units represented by the SSEA and the CUPTE "because the person ... was or is exercising any right under this Act", that is, the right to participate in collective bargaining.

[94]         Discrimination contrary to sections 8 and 9 of the PSSRA requires intent or anti-union animus. In the present case, intent can be inferred by the employer's failure to provide an explanation of compelling business reasons, or legitimate business purposes for its actions. The employer has provided no valid reason to explain the differential treatment. I can only infer that the detrimental effect of the discrimination on the employees in the bargaining units represented by the CUPTE and the SSEA was intended, as well as the repercussion on their bargaining agents.

[30]            As appears from the above paragraphs of the decision, the Board concluded that the respondents had met their burden of proving that the employer had discriminated against them and their members, contrary to sections 8 and 9 of the Act. The Board's rationale, in concluding as it did, is as follows.

[31]            Firstly, the Board noted that the application of Lajoie to unionized employees and "Lajoie or better" to non-unionized employees was, on its face, discriminatory.

[32]            Secondly, although recognizing that the employer could negotiate with its unionized employees terms and conditions which differed from those agreed to with non-unionized employees, the Board was of the view that the terms and conditions applicable to unionized employees had to be negotiated and that there had to be "a legitimate business reason to grant the [more favourable] terms to the excluded and non-represented employees".

[33]            Thirdly, the Board concluded that since the Lajoie decision had never been discussed nor negotiated with the unionized employees, its application did not constitute a negotiated term or condition. The Board further held that even if it could be inferred that the application of Lajoie was a negotiated term of employment, Treasury Board had not provided any justification for its application to unionized employees only.

[34]            Fourthly, since Treasury Board had not put forward any valid reason for applying the Lajoie method of recalculation to unionized employees only, it had not justified the distinction in treatment. Hence, the distinction was discriminatory and contrary to the Act.

[35]            Finally, the Board correctly pointed out that to succeed on a complaint made pursuant to sections 8 and 9 of the Act, the respondents had the burden of proving intent or anti-union animus. However, the Board was of the view that anti-union animus could be inferred by reason of Treasury Board's failure to provide justification for the difference in treatment, i.e. to provide "an explanation of compelling business reasons or legitimate business purposes for its actions".

Grounds of Application and Standard of Review

[36]            The Attorney General seeks an order setting aside the Board's decision. He says that the Board erred in the following respects:

1.         The Board disregarded basic principles of collective bargaining in that the Act does not oblige Treasury Board to offer the same terms of employment to its unionized and non-unionized employees.

2.         The Board acted without jurisdiction in holding that Treasury Board had to justify the distinction made between its unionized and non-unionized employees.

3.         The Board erred in inferring anti-union animus by reason only of Treasury Board's failure to justify the distinction between its unionized and non-unionized employees.

[37]            The Attorney General says that as a result of these errors, the Board's decision is patently unreasonable. There is no issue before us with respect to the applicable standard of review. Both sides have taken the position that the applicable standard is that of the patently unreasonable decision. I agree.

Analysis

[38]            For the reasons that follow, I conclude that the Board's decision is patently unreasonable. In my view, there was simply no evidence to support the conclusion reached by the Board. In reaching its conclusion, the Board made a number of errors which I will now discuss.

[39]            The first error made by the Board is found at paragraphs 88 and 89 of its decision, where it concludes that the distinction in treatment by Treasury Board between its unionized and non-unionized employees, i.e. the application of the Lajoie method of recalculation to unionized employees only, is, on its face, discriminatory. That conclusion, in my view, flies in the face of the Act and of the authorities.

[40]            Firstly, pursuant to sections 7 and 11 of the Financial Administration Act, Treasury Board had the right to fix the terms and conditions of employment of its non-unionized employees. As to the government's unionized employees, their terms and conditions of employment result from the collective bargaining process.

[41]            Secondly, there can be no doubt that subsection 9(1) of the Act, which prohibits an employer from discriminating against an employee organization (in French, "de faire des distinctions injustes à l'égard d'une organisation syndicale"), does not prevent the making of distinctions between various groups of employees, whether they be unionized or non-unionized. Although subsection 9(1) is to the effect that distinctions arising from the collective bargaining process which find their way into collective agreements do not constitute discrimination, the subsection is silent with respect to non-unionized employees and their terms of employment. It is my view that the subsection cannot be read as preventing an employer from making distinctions between its unionized and non-unionized employees. To read the provision otherwise would mean that whenever non-unionized employees receive terms of employment more favourable than those negotiated on behalf of the unionized employees, for example more vacation leave, performance pay, higher wages, etc., the latter could then claim discrimination on the basis of union membership. That cannot be.

[42]            Hence, it follows that distinctions in the conditions of employment of unionized and non-unionized employees are perfectly legitimate and cannot give rise to a complaint of discrimination under sections 8 and 9 of the Act, unless it is shown that the purpose of the distinction is to harm the unions and their members. In Re Ontario Hydro and Canadian Union of Public Employees, Local 1000 (1/994), 40 L.A.C. (4^th) 135, at pages 146 and 147, a labour board makes this perfectly clear:

It is surprising that there are so few cases on this subject, but perhaps it simply indicates that it has been generally accepted that no-discrimination clauses of the present type, whether such clauses are interpreted narrowly or broadly, were never intended to prohibit preferential treatment of members of one bargaining unit over those of another, or of excluded employees over members of a bargaining unit or units. The very essence of collective bargaining is that such differences will be subject of negotiation separately in respect of each bargaining unit, and of corporate policy in respect of non-represented employees. It is endemic in such a legal structure that very different outcomes will arise for differently represented groups of employees; in the case of Ontario Hydro, that result is already clearly indicated in the differences between the society collective agreement and the union collective agreement, and by the quite different terms and conditions of employment applicable to non-represented employees.

Clauses prohibiting discrimination on the basis of union membership have never been interpreted, nor has it even been proposed, to prohibit an employer from providing terms and conditions of employment for non-represented employees that are very different from those of bargaining unit members, even if they are in fact quite superior. [...]

                                                                                                                   (Emphasis added)

[43]            This view finds support in Brown and Beatty, Canadian Labour Arbitration, 3^rd ed., looseleaf, at para. 8:1000, where the editors, under the heading of "Entitlement to Wages", state:

A claim that bargaining unit employees should be eligible for the same fringe benefits as non-unionized employees (...) is a matter for collective bargaining and nor for arbitration.

[44]            In Re Major Foods Ltd. and Retail, Wholesale & Department Store Union, Local 1065 (1989), 7 L.A.C. (4^th) 129, a labour arbitrator had no difficulty concluding that the establishment of different terms and conditions of employment for unionized and non-unionized employees did not constitute discrimination on the basis of union membership:

There is a provision in the Industrial Relations Act which is for all intents and purposes identical to the collective agreement provision (s. 3(2)). It prohibits an employer from discriminating against any person in regards to any term or condition of employment on the basis of union membership. If counsel for the union were correct in his argument the same reasoning would apply to the interpretation of s. 3(2) and it would be an offence for an employer to establish different terms and conditions for its organized and non-organized employees. Clearly that is not the intent of the statutory provision and it is not the way it has been interpreted by labour boards and by the courts: see Adams, Canadian Labour Law (1985), pp. 489-95. [...]

                                                                                                                   (Emphasis added)

[45]            In Re Husky Oil Operations Ltd. And C.E.P., Loc. 1997 (1999), 84 L.A.C. (4^th) 162, a labour arbitrator dealt with a union's contention that its members should receive a corporate performance bonus similar to that which had been granted to non-unionized employees, but which had not been expressly provided for in the collective agreement. In rejecting that contention, the labour arbitrator made the following remarks at p. 170:

It seems to me axiomatic that a collective agreement will contain different benefits than those given to non-bargaining unit employees. Otherwise, there would be little purpose in having a collective agreement than to set minimum standards. There is certainly nothing in the jurisprudence which indicates that employees covered by a collective agreement can also demand any other benefits that they may wish to have. If this Union were successful in the grievance before this Board, they could, on the same logic, demand for example, the ten personal days off each year which are presently given to non-union personnel.

                                                                                                                   (Emphasis added)

[46]            Consequently, the Board erred in holding that the application of the Lajoie decision to unionized employees only was, on its face, discriminatory.

[47]            The Board's first error led it to a further error, i.e. that Treasury Board had to justify the distinction in treatment. In turn, this error led to a final one, i.e. that by reason of Treasury Board's failure to provide an explanation of compelling business reasons, an intention to discriminate or anti-union animus could be inferred. I now turn to these errors.

[48]            The Board's second error can be found at paragraphs 90 and 91 of its decision, where it states that for the employer to grant preferential terms of employment to non-unionized employees, it must provide a valid reason to justify the preferential treatment. At paragraph 90 of its decision, the Board states that "there must be a legitimate business reason to grant the terms to the excluded and unrepresented employees", while at paragraph 91, it states that "no valid reason was provided to explain why the Lajoie decision would apply to unrepresented employees only if it provided a greater benefit than the recalculation method, while it would apply to represented employees no matter what the outcome was for them".

[49]            I start with the proposition that Treasury Board had no obligation to justify the distinction in treatment between its unionized and non-unionized employees. Since it was perfectly legitimate for Treasury Board to make distinctions between these groups of employees, I fail to see on what basis it had to justify the distinction. There is nothing in the Act nor in the authorities to support the Board's view.

[50]            I am not suggesting that the Board can never consider the absence of justification as a relevant fact in its attempt to determine whether anti-union animus is behind a distinction in treatment between groups of employees. However, the Board could not, as it did, find anti-union animus simply on the basis of Treasury Board's failure to justify the distinction. In other words, there had to be some evidence giving credence to the respondents' allegation that the reason for the distinction was anti-union animus. In those circumstances, the Board could possibly have drawn the inference that it did. Since there was absolutely no evidence before the Board that the distinction in treatment was the result of anti-union animus, the Board could not, in my respectful view, draw the inference that it did.

[51]            Paragraph 23(1)(a) of the Act provides that the Board shall examine and enquire into any complaint pertaining to an employer's failure to "observe any prohibition contained in section 8, 9 or 10". There can be no doubt whatsoever that such proof rests with the person or persons making the complaint, in this case, the respondents (See Veilleux and Public Service Commission, [1983] C.P.S.S.R.B. No. 9; Prue et Bhabba, [1989] C.R.T.F.P.C. no 210; Alliance de la Fonction publique du Canada c. Little, [1996] C.R.T.F.P.C. no 76 (Q.L.)).

[52]            The respondents do not dispute that the burden of proof was theirs, but they submit that the Board did not act unreasonably in drawing an inference of anti-union animus. In my view, in drawing such an inference on the basis only of Treasury Board's failure to justify the distinction, the Board, in effect, reversed the burden of proof. In other words, as a consequence of the Board's inference, the burden of demonstrating that the purpose of the distinction in treatment was not to harm the unions and their members was squarely placed upon Treasury Board. That, in my view, was clearly an error on the part of the Board.

[53]            At paragraph 94 of its decision, the Board correctly, in my view, states that discrimination contrary to sections 8 and 9 of the Act "requires intent or anti-union animus". In Re Major Foods, supra, at page 136, the arbitrator stated:

Labour boards have held for there to be an offence against a statutory prohibition, there must be demonstrated an intent to discriminate.

[54]            It is clear from the Board's decision that there was no proof adduced before it which could support a conclusion of anti-union animus on the part of Treasury Board. Consequently, the only possible conclusion that the Board could have reached, on the evidence, was that the respondents had not met their burden of proof.

[55]            A few other remarks are in order. In my view, the Boards's errors result from its failure to properly understand the significance of Lajoie. At paragraph 91 of its Reasons, the Board points out that Lajoie and its application were not valid terms of employment of the unionized employees because Lajoie was never raised during the collective bargaining process.

[56]            The Attorney General does not dispute the fact that Lajoie was neither raised nor discussed with the respondent unions. He says, however, that in Lajoie, our Court simply interpreted the terms and conditions of employment of Mr. Lajoie as they appeared in the collective agreement at issue. Since the relevant terms and conditions of employment herein are, for all intents and purposes, the same as those found in Lajoie, the Attorney General says that Lajoie is applicable and, hence, Treasury Board was correct in applying its method when recalculating the wages of its unionized employees following the retroactive application of a new collective agreement. At paragraphs 12 to 16 of his Memorandum of Fact and Law, the Attorney General sets outs his understanding of Lajoie and what consequences flow from that decision:

12.           Malgré les principes avantageux édictés par cette Cour dans l'arrêt Lajoie, principes qui consistaient à dire que le calcul des salaires devaient se faire en fonction des taux de salaire qui étaient connus au moment d'une promotion ou d'une mutation et non en fonction des taux qui avaient été modifiés rétroactivement, l'application de ces principes a créé, dans certains cas, des désavantages.

13.           La décision Lajoie a été rendue en fonction des faits propres aux deux griefs présentés à l'arbitre.

14.           Puisque cette Cour a confirmé dans l'affaire Lajoie les prétentions syndicales, il faut tenir pour acquis que les effets recherchés de cette décision faisaient l'affaire de cet agent négociateur, malgré tout.

15.           Toutefois, le demandeur, qui était lié par la décision Lajoie parce qu'il s'agit d'une décision arbitrale qu'il devait mettre en oeuvre à l'égard des fonctionnaires syndiqués de la fonction publique qui ont des conventions collectives identiques à celle qui était visée dans l'affaire Lajoie, a décidé de ne modifier que ce qu'il avait le droit de modifier, soit, les conditions d'emploi des fonctionnaires non syndiqués, notamment les administrateurs du personnel (PE).

16.           L'employeur a par conséquent prévu que, dans le cas des fonctionnaires non syndiqués, donc non assujettis à une convention collective, les salaires de ces derniers seraient calculés selon la méthode la plus favorable à l'employé. Cette méthode est communément appelée « méthode Lajoie ou mieux » .

[57]            For the Attorney General, Lajoie dictates to Treasury Board and to the unions the manner in which rates of pay shall be calculated by reason of the retroactive application of a new agreement. As I understand the point which the Attorney General wishes to make, it is also that Lajoie constitutes the justification for the distinction made by Treasury Board between its unionized and non-unionized employees.

[58]            The respondents' understanding of Lajoie differs from that of the applicant. At paragraph 7 of their Memorandum of Fact and Law, the respondents state:

7.             In Lajoie this Court upheld a decision of an adjudicator concerning the appropriate method for retroactively calculating the salary of an employee who had been transferred or promoted prior to the conclusion of negotiations for a renewed collective agreement. The adjudicator, upheld by this Court, rejected the method used by the employer, substituting an approach that resulted in a greater benefit for the grievor. The facts and issues raised in Lajoie were unique and complex, and its applicability to other fact situations not all that clear. Notwithstanding this and without giving any notice to either SSEA or CUPTE, the employer relied on its interpretation of the decision to change a long-standing method of recalculating salaries.

[59]            Let me first say that I tend to agree with the respondents that Lajoie's application to other cases is far from clear (See Buchmann c. Agence des douanes et du revenu du Canada, [2002] C.R.T.F.P.C. no 8; Copeland c. Conseil du Trésor (Solliciteur général du Canada - Service correctionnel), 2003 CRTFP 19). I would nonetheless not have been prepared, had this issue been before us, to say that Treasury Board's understanding of Lajoie and, hence, the method of recalculation that it has adopted, is untenable or taken in obvious bad faith.

[60]            For the present purposes, however, it does not matter whether Treasury Board's understanding of Lajoie is correct or not, since what is at issue are complaints of discrimination made pursuant to section 23 of the Act. As Lajoie is simply our Court's interpretation of the terms and conditions of employment at issue in that case, which terms are very similar to those found in the collective agreements entered into by Treasury Board and the respondent unions, I fail to understand the Board's rationale. Had the issue before the Board been one of interpretation of the collective agreements or one arising from the filing of grievances, the Board would, in those circumstances, have had to decide whether the Court's reasoning in Lajoie was relevant to a determination of the issues. However, in the context of the specific issue before the Board and now before us, the merits of the Lajoie decision with regard to the method of calculating retroactive increases is totally irrelevant.

[61]            The Board, although it does not say so specifically, seems to have taken a dim view of the fact that Lajoie and its application to retroactive wage increases were not raised by Treasury Board negotiators during the collective bargaining process. This, in my view, is also an irrelevant factor. If the respondent unions felt that Treasury Board negotiators had not conducted the negotiations in good faith, it was open to them to have recourse to section 51 of the Act, which provides that collective bargaining is to be conducted in good faith. No such issue was before the Board.

[62]            In addition, it goes without saying that it was also open to the Respondents to contest Treasury Board's method of calculating retroactive wage increases through the grievance process provided for in the collective agreements.

[63]            One final remark. At paragraph 92 of its decision, the Board says that even if Lajoie and its application had constituted a negotiated term of employment, Treasury Board would still have had to justify why it gave a preferential term of employment to its non-unionized employees. Consequently, it appears that the Board was of the view that whenever Treasury Board grants preferential terms of employment to its non-unionized employees, it is in violation of sections 8 and 9 of the Act. In other words, granting preferential terms to non-unionized employees constitutes, unless a legitimate business reason is put forward by the employer, anti-union animus. For the reasons which I have already given, that proposition is, in my respectful view, simply untenable.

Conclusion

[64]            For these reasons, I would allow the Attorney General of Canada's judicial review application with costs, set aside the decision rendered by the Board on November 22, 2002 and refer the matter back to the Board for redetermination on the basis that the complaints made by the Respondents against Treasury Board should be dismissed.

                                                                                     "Marc Nadon"               

                                                                                                      J.A.

"I agree

Gilles Létourneau J.A."

"I agree

J.D.Denis Pelletier J.A."

                          FEDERAL COURT OF APPEAL

    NAMES OF COUNSEL AND SOLICITORS OF RECORD

DOCKET:                  A-691-02

STYLE OF CAUSE: ATTORNEY GENERAL OF CANADA v. SOCIAL SCIENCE EMPLOYEES ASSOCIATION et al.

PLACE OF HEARING:                                 Ottawa, Ontario

DATE OF HEARING:                                   December 9, 2003

REASONS FOR JUDGMENT:                    NADON J.A.

CONCURRED IN BY:                                  LÉTOURNEAU J.A.

PELLETIER J.A.

DATED:                     April 26, 2004

APPEARANCES:

SOLICITORS OF RECORD: