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  5. Rules Of Contract Interpretation
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  5. Rules Of Contract Interpretation

1. The plain, everyday meaning of the words carries most weight.

Generally, it is only when a contract is not clear that it ends up at arbitration. Arbitrators do not want to find reasons to go looking for things outside the plain meaning of the words to understand the meaning of a contract.

2. Previous decisions of Arbitrators on similar facts and contract language carry weight.

Arbitrators believe unions and management should know about the effect that previous arbitration awards have on the interpretation of contract language.

For example, a union should not expect an arbitrator to overrule contracting out of bargaining unit work solely on the fact that the recognition clause names the job classifications covered in the contract. Arbitrators have already ruled that specific, clear and unequivocal contract language is needed to prevent management from contracting out.

3. There are limits on management’s rights.

The employer’s power to make workplace rules is supported by so-called ‘management’s rights’ to direct the work force.

However, management cannot make workplace rules that clearly go against words in the collective agreement. Making rules that go against the collective agreement is the same as changing the collective agreement. Management cannot do this without the union’s agreement.

Clear cut collective agreement language is not the only thing that limits management’s ability to make rules that lead to firing or disciplining workers. An employer rule must pass another test.

That test is known as the ‘KVP decision’ (KVP Co. and Lumber & Sawmill Worker’s Union, Local 2537, (1965) 16th Labour Arbitration Cases, First series, Page 73 (Robinson, arbitrator).

This is a decision every arbitrator follows when the issue concerns a “company rule” unilaterally made by the employer.

The KVP decision says that if the employer makes a new rule unilaterally, without the union agreeing to it, in order for that rule to be considered enforceable:

  • it cannot change negotiated terms of the collective agreement without the union’s consent
  • it must be consistent with the collective agreement
  • it must not be unreasonable
  • it must be clear
  • it must be brought to the attention of everyone if it is to be acted on
  • it must be consistently enforced.

Further, if the employer is considering discharge for an infraction of a rule, this must be brought to the attention of everyone concerned.

The KVP decision went a long way in establishing reasonable limits on ‘management rights’ even in cases where the collective agreement seems to be silent on the issue at hand. That is the reason why unions and arbitrators still refer to the KVP decision when the union is challenging the very conservative, pro management theory that says all rights belong to management unless there are clear and explicit words in the collective agreement to the contrary.

4. The Collective Agreement can provide better than the law but not worse.

Arbitrators have the right to interpret and apply employment-related legislation, including human rights legislation.

The Supreme Court of Canada (Parry Sound vs. OPSEU Local 234 (2003), 230 DLR (4th)257 made it clear that employment and human rights legislation are incorporated into the collective agreement. This is also spelled out in the labour legislation in each province and  federally (for example section 48(12)(j) of Ontario’s Labour Relations Act and Section 60 (a.1) of the Canada Labour Code).

Arbitrators can also refuse to enforce sections of a collective agreement that are unlawful (for example, a breach of health and safety laws).

For example, employers often want to force workers to work mandatory overtime. Workers sometimes like to
work overtime, but they generally don’t like be forced to do so. Local unions often use the employment standards act to limit the hours the employer can force workers to work mandatory overtime. The words in the collective agreement might give the employer the right to schedule unlimited overtime, but Employment Standards Acts generally limit the hours of work that employers can force workers to work in overtime without the workers’
consent (the collective agreement is deemed consent).

More and more, union bargaining committees are taking care to negotiate words into collective agreements to make important workplace legislation a part of the collective agreement with the important riders that

  1. where the collective agreement provides better, the collective agreement will apply,
  2. if the legislation is amended to provide better than the collective agreement, those amendments to legislation will also apply, and
  3. if the legislation is changed in such a way as it suddenly provides less protection to the worker than what was provided before the change in the legislation, the legislation in effect on a certain date specifically named in the contract will apply.

An important benefit of spelling out workers’ rights, even if they are just the minimums found in the law, is that workers can read the collective agreement and understand their rights rather than having to go looking for whatever legislation applies.

5. Past practice and what was said at the bargaining table, carry weight.

If the words used in a contract clause are not clear (if they are ambiguous), how the union and management have applied the clause in practice and what they said in negotiations about it, give the clause the meaning that can be enforced.

For something to be considered a past practice, it has to be clear and unambiguous, known to the other side, and consistently followed.

This is why it is wise for workplace representatives to keep copies of letters between the employer and the union or employer notices, memos, etc. when such letters deal with issues in the collective agreement. It is also wise to keep detailed, dated notes on what the employer said in negotiations. It is better still to clear up ambiguities in negotiations by agreeing to write clear, unambiguous language.

Unions have used “past practice” to help settle grievances successfully. However, if the issue goes to arbitration, most arbitrators will limit our reliance on past practice:

“If a provision in an agreement, as applied to a labour relations problem, is ambiguous in its requirements, the arbitrator may utilize the conduct of either one of the parties, as an aid to clarifying the ambiguity. The theory requires that there be conduct of either one of the parties, which explicitly involves the interpretation of the agreement according to one meaning, and that this conduct (and, this interpretation) be acquiesced in by the other party. If these facts are established, the arbitrator is justified in attributing this particular meaning to the ambiguous provision. The main reason for this is that the best evidence of the meaning, most consistent with the agreement, is that mutually accepted by the parties. Such a doctrine, while useful, should be quite carefully employed.” SOURCE: John Bertram & Sons Co. Ltd., (1967) Volume 18, Labour Arbitration Cases, Page
362, (Weiler, arbitrator).

So, where it can be shown that a “practice” has existed for a long period of time, that both management and union have accepted the practice as an interpretation (or aid to interpretation) of the contract, and the past practice gives meaning to words which are unclear or ambiguous in the contract, then the “past practice” may be enforced.

6. “Estoppel” can make the other side keep apromise.

The idea of estoppel means one party to an agreement (either union or management, for example) cannot insist on its rights under the strict words of the agreement.


  • There’s representation. That is to say, if by its statements or conduct (including past practice), one party has given the other party to the agreement reason to believe it would not enforce the strict words of the agreement.
  • There’s reliance. That is to say, if the other party came to rely on that representation.
  • There’s detriment. That is to say, if the other party gives up some right or benefit by relying on that representation.

So, here’s an example of how estoppel can arise from a statement made in negotiations.

Let’s say the employer always provided the members with free work boots. In negotiations, you told the employer you wanted this benefit to be spelled out in the collective agreement. The employer answered you by making the statement, for the record, that you need not worry: the employer will continue to supply the members with free work boots. The union bargaining committee accepted this promise and dropped the demand to put this benefit into the collective agreement. After the contract was signed, the employer said they would stop supplying free work boots. They tell you it isn’t in the collective agreement. They don’t have to supply them.

You file a grievance. The grievance is about estoppel. The employer’s statement in negotiations
(representation) led you to take them at their word (reliance) and, as a result you gave up the chance to negotiate the benefit (detriment).

In this situation, the union grievance would be upheld by most arbitrators.


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