Apr 8, 2020

Contracts/Arbitration: Post-Sattva Contractual Interpretation

Alberta Union of Provincial Employees v Alberta Health Services, 2020 ABCA 4 (CanLII)

Keywords: Labour arbitration; surrounding circumstances; Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 (CanLII), [2014] 2 SCR 633


A labour arbitrator concludes that the words “Operational Restructuring” in an addition to a collective agreement refer to Alberta Health Services’ “Operational Best Practices” program and any successor program that is substantially the same.

The meaning of “Operational Restructuring” determines the scope of protections for union members against job losses resulting from changes to Alberta Health Services’ operations.

The Court of Appeal quashes the arbitrator’s decision as unreasonable and remits the matter to the parties “for further action”.


The Court of Appeal noted this appeal was about the arbitrator’s approach to the interpretation of a collective agreement and whether he reasonably applied the law on contractual interpretation as set out in Sattva Capital Corporation v Creston Moly Corporation, 2014 SCC 53. (See para. 20).

The Court of Appeal provided detailed commentary on the law of contractual interpretation post-Sattva, and the extent to which “surrounding circumstances” must be considered by a labour arbitrator, at paras. 23-44. The Court set out the following conclusions on the impact of Sattva at para. 44:

  • labour arbitrators must consider evidence of relevant surrounding circumstances when interpreting a collective agreement, regardless of whether the language is ambiguous;
  • it is never appropriate to consider the subjective intention of the parties when interpreting a collective agreement;
  • there may remain circumstances where it will be necessary to establish an ambiguity in the contract language before being permitted to admit evidence (e.g. evidence of negotiations not otherwise admissible as to surrounding circumstances, past practice, post-contract conduct). (See para. 44).

Applying these principles to the facts of this case, the Court of Appeal was critical of the method by which the arbitrator arrived at his decision. (See paras. 51-58 in particular). For the Court of Appeal, whereas it was reasonable to consider the text and surrounding circumstances of the collective agreement, it was not reasonable to consider “evidence of [the parties’] subjective intentions” about the meaning of “Operational Restructuring” to interpret the agreement. (See para. 3).

Citing Canada (Minister of Citizenship and Immigration) v Vavilov, 2019 SCC 65 at paras. 139-141, the Court of Appeal declined to “supplant the analysis of the administrative body” and refused to “save” the arbitrator’s reasons from their consideration of the subjective intentions of the parties in ascribing meaning to the words “Operational Restructuring”. (See paras. 58-59). In these circumstances, the arbitrator’s decision was quashed and remitted without comment on “the reasonableness of the outcome…or the reasonableness of the positions of either of the parties.” (See para. 59).

But being an arbitrator, particularly in the labour area, is a tricky job. Threading the needle, or as some say, “if both sides are equally ticked off, then good job done.” Would it be helpful if a Court of Appeal (or Supreme Court of Canada) were to have a good long look at this area and clearly set out

  • what can be looked at
  • what can’t
  • and for what purposes?

Do the three bullets at the top of this brief review (i.e. starting “labour arbitrators must…) provide that clean, clear guidance, or is more needed? Leave to appeal to the Big House?

It is also reasonable to ask whether this outcome does/does not put the parties or arbitrators in any better position re when necessary to establish an ambiguity and therefore when bargaining history, past practice etc. can/cannot be considered as part of what the Court calls the “surrounding circumstances” analysis. Could the Court of Appeal have given more guidance on this? Perhaps the Supreme Court will, if asked?

Counsel for the Appellant: Patrick Nugent/Adam Cembrowski (Nugent Law Office, Edmonton)

Counsel for the Respondent: Craig Neuman, Q.C. (Neuman Thompson, Edmonton)