Written by: Natasha L. Edgar
The upheaval and confusion caused by the COVID-19 pandemic has affected every workplace. Can it alter or end a collective agreement through the common law doctrine of “frustration”?
What is “Frustration”?
Frustration is a common law doctrine which may apply to end a contract. It may apply where an event, which is not the fault of either party and which is not provided for in the contract, significantly changes the nature of the parties' rights or obligations from what they could reasonably have contemplated when executing the contract, makes it be unjust to hold them to the terms of the contract. When a contract is frustrated, both parties are released from further performance of their obligations under the contract.
Does “Frustration” Apply to Collective Agreements?
Can an entire collective agreement be “frustrated” by an event like COVID-19? Can an employer unilaterally impose new terms on a union by saying that a collective agreement has been frustrated?
The short answer is no. A collective agreement is not a regular or ordinary contract. That was made clear in the 1975 Supreme Court of Canada decision in McGavin Toastmaster Ltd. v. Ainscough et al., [1976] 1 S.C.R. 718. The Court found that common law concepts like fundamental breach and repudiation do not apply to collective agreements and that they would undermine the duty to bargain collectively.
Arbitrators have since addressed whether a collective agreement can be frustrated.
In London Transit Commission v. ATU (1983), 10 LAC (3d) 348, Arbitrator Rayner soundly rejected the idea that the common law doctrine of frustration was applicable to collective agreements. Relying on McGavin Toastmaster, the Arbitrator reasoned:
25 In McGavin Toastmaster Ltd. v. Ainscough et al. (1975), 54 D.L.R. (3d) 1, [1976] 1 S.C.R. 718, [1975] 5 W.W.R. 444, 4 N.R. 618, the Supreme Court of Canada, after considering the statutory framework surrounding collective agreements, concluded that the doctrine of repudiation could not be applied to collective agreements. By analogy we are of the view that the doctrine of frustration also cannot be applied: see Re Rexwood Products Ltd., 1980, unreported (Brown). The doctrine is applied to the contract as a whole, and whether one accepts that the doctrine is based on an implied term of the contract theory or the theory that the court imposes a just solution (see Cheshire and Fifoot, The Law of Contract, 5th ed. (1960), at p. 464), the contract must be regarded as a whole to determine if its terms have been defeated: Denny, Mott & Dickson, Ltd. v. James B. Fraser & Co. Ltd., [1944] A.C. 265. If the contract is frustrated, the contract is brought to an end without more: Hirji Mulji et al. v. Cheong Yue Steamship Co. Ltd., [1926] A.C. 497.
26 It is difficult to imagine a set of circumstances that would "frustrate" a collective agreement especially in light of the reasoning of the McGavin Toastmaster decision. As well, it is not proper to conclude only one part of the contract is frustrated. If the doctrine is applicable, the contract is frustrated. Rather, the proper approach of a board of arbitration should be to apply the collective agreement as written to the facts before it. If the agreement imposes a certain obligation on one party or the other under the agreement that obligation must be met.
More recently in British Columbia, Arbitrator Kinzie considered whether a collective agreement had been frustrated in Brandt Tractor Ltd. v. IUOE, Local 115, [2007] B.C.C.A.A.A. No. 239. The employer argued that a collective agreement provision had been frustrated because the employer had been unable to hire journeymen due to a shortage of available workers. The Arbitrator concluded that there had been no frustration in the circumstances and said the following about whether frustration could apply to a collective agreement:
76 I too have real doubts as to whether this doctrine should be found to be applicable to collective agreements in British Columbia. Its application would not appear to be consistent with an ongoing relationship such as the one that exists between an employer and a trade union, nor with the principles set out in Section 2 of the Labour Relations Code. Further, the Code contemplates, in my view, that if a frustrating-like event occurs and impacts the provisions of a collective agreement, the parties will consult with one another regarding the event and see if they can work out a solution. The parties can also request a facilitator be appointed to assist them in their discussions. See Section 53 of the Labour Relations Code. Section 53 (4) sets out the kinds of events that could be the subject matter of this obligation to consult:
"The purpose of the consultation committee is to promote the cooperative resolution of workplace issues, to respond and adapt to changes in the economy, to foster the development of work related skills and to promote workplace productivity."
During these unprecedented times, employers and unions continue to have access to procedures to help them resolve disputes. Section 53 of the Labour Relations Code continues to apply and provides that on the request of either party to a collective agreement, the parties must meet at least once every two months until this agreement is terminated, for the purpose of discussing issues relating to the workplace that affect the parties or any employee bound by this agreement. Either party may request the Labour Relations Board to appoint a facilitator to assist them in developing a more cooperative relationship.
Section 54 requires an employer who introduces or intends to introduce a measure, policy, practice or change that affects the terms, conditions or security of employment of a significant number of employees to whom a collective agreement applies, to give notice to the trade union at least 60 days before the date on which the measure, policy, practice or change is to be effected. After notice has been given, the employer and trade union must meet, in good faith, and endeavour to develop an adjustment plan. Either party may apply to the Board to appoint a mediator to assist them in developing an adjustment plan.
The Labour Board continues to operate and is offering many of its services virtually: http://www.lrb.bc.ca/.
The long-standing analysis by arbitrators and courts suggest that frustration does not apply to collective agreements and cannot be used by employers during the COVID-19 pandemic as the basis upon which to end or alter a collective agreement.
This blog is not legal advice, and is intended for general information purposes only. If you need advice about your specific situation, you should speak to a lawyer. The lawyers at Moore Edgar Lyster LLP can be reached here.