A-869-76
The Administrator under the Anti-Inflation Act
(Applicant)
v.
Canadian Union of Public Employees, Local 1369
(Respondent)
Court of Appeal, Pratte, Ryan and Le Dain JJ.—
Ottawa, March 18 and April 7, 1977.
Judicial review — Administrator ruling that compensation
awarded a group with which respondent Union had historical
relationship was inflationary — Not allowing complete catch
up — Anti-Inflation Appeal Tribunal ruling this decision in
error — Whether Tribunal erred in interpretation of s. 44 of
Anti-Inflation Guidelines — Anti-Inflation Act, S.C. 1974-
75-76, c. 75 (as amended), ss. 12(/)(c),(d./), 17(1) — Anti-
Inflation Guidelines, s. 44 — Federal Court Act, s. 28.
Respondent Union entered into a collective agreement with
the employer for a two-year period commencing January 1,
1976. The agreement was referred to the Anti-Inflation Board.
The Board's recommendations were not acceptable to the par
ties, and the matter was referred to the Administrator. Prior to
the coming into force of the Anti-Inflation Act, a group with
which the respondent Union had an historical relationship had
negotiated a new contract. The Administrator ruled, inter alia,
that the relationship was not particularly strong, and that the
award to the "target group" was unusually generous. He
allowed the Union only a partial catch-up. The Appeal Tri
bunal ruled that section 44 of the Anti-Inflation Guidelines
required the maintenance of the historical relationship. The
Administrator brought this section 28 application to review and
set aside the Tribunal's decision.
Held, the decision of the Appeal Tribunal is set aside.
Section 44 of the Guidelines allows for increases in compensa
tion over and above the amounts allowed under section 43
where the group has an historical relationship with another
group. But, this further amount must be "consistent with the
objectives of the Act." According to the preamble of the Act,
those objectives are "the containment and reduction of infla
tion". Section 44(1)(d) does not confer an unqualified right to
grant the full amount of the increase that might be necessary in
a particular case to maintain an historical relationship. The
Administrator was entitled to consider the inflationary impact
of the award to the "target group".
JUDICIAL review.
COUNSEL:
D. Aylen, Q.C., and D. Friesen for applicant.
S. R. Hennessy for respondent.
SOLICITORS:
Deputy Attorney General of Canada for
applicant.
S. R. Hennessy, Ottawa, for respondent.
The following are the reasons for judgment
rendered in English by
LE DAIN J.: This is an application under section
28 of the Federal Court Act to review and set
aside a decision of the Anti-Inflation Appeal Tri
bunal allowing an appeal from an order of the
Administrator under the Anti-Inflation Act, S.C.
1974-75-76, c. 75.
The case involves the construction and applica
tion of section 44 of the Anti-Inflation Guidelines,
which were adopted pursuant to section 3 of the
Act by Order in Council P.C. 1975-2926 of
December 16, 1975 [SOR/76-l]. Section 44,
which lays down the guidelines for increases in
compensation where there is an historical relation
ship between two groups of employees, reads, as
amended by Order in Council P.C. 1976-1033 of
May 6, 1976 [SOR/76-298], as follows:
44. (1) Where a group
(a) in respect of which
(i) a compensation plan entered into or established on or
before January 1, 1974, expired prior to October 14, 1975,
and
(ii) a new compensation plan was not entered into or
established prior to October 14, 1975, or
(b) has an historical relationship with another group,
the employer may in a guideline year increase the total amount
of the compensation of all the employees in the group, by an
amount that is not greater than the sum of
(c) the amount permitted under subsection 43(1), and
(d) such further amount as is consistent with the objectives
of the Act.
(2) For the purposes of paragraph (1)(b), a group has an
historical relationship with another group
(a) where
(i) for a period of two or more years prior to October 14,
1975, the level, timing and rates of increase of compensa
tion of the employees in the groups have borne a demon
strable relationship with each other, or
(ii) prior to October 14, 1975, the rates for the benchmark
jobs in each group were identical; and
(b) where the employees in the groups
(i) have the same employer, are employed in the same
industry, or are in the same local labour market, and
(ii) perform work that is related to the same product,
process or service.
The groups that have the historical relationship
in this case are the bargaining units which contain
the custodial and maintenance employees of the
Sudbury Board of Education and the Sudbury
District Roman Catholic Separate School Board.
They are represented by Locals 895 and 1369
respectively of the Canadian Union of Public
Employees. The collective agreements entered into
by Local 1369 have in recent years followed those
of Local 895 by about six months and been largely
based on the increases obtained by the latter. The
issue that gives rise to these proceedings is the
amount of increase in compensation that is to be
permitted to the employees in Local 1369 to allow
for the historical relationship established between
their bargaining unit and that of the employees in
Local 895 before the Anti-Inflation Guidelines
became applicable on and after October 14, 1975.
A collective agreement entered into by the Sud-
bury District Roman Catholic Separate School
Board and the respondent Union, Local 1369, for a
two-year period from January 1, 1976 provided for
increases in compensation designed to maintain
the historical relationship between the two groups,
having regard to the increases that had been pro
vided by the last agreement of the Sudbury Board
of Education and Local 895, which took effect on
July 1, 1975.
The collective agreement was referred to the
Anti-Inflation Board. The Board made recommen
dations which the parties did not find acceptable',
and the matter was referred to the Administrator 2 ,
who caused an investigation to be carried out
Paragraph 12(1)(c) of the Act reads:
12. (I) The Anti-Inflation Board shall
(c) identify the causes of actual and proposed changes in
prices, profits, compensation and dividends identified
under paragraph (b) that are, in its opinion, likely to have
a significant impact on the economy of Canada, and
endeavour through consultations and negotiations with the
parties involved to modify such changes so as to bring
them within the limits and spirit of the guidelines or
reduce or eliminate their inflationary effect;
2 Paragraph 12(1 )(d.1) of the Act as added by S.C. 1974-75-
pursuant to section 17 of the Act, which reads in
part as follows:
17. (1) Where the Anti-Inflation Board, pursuant to para
graph 12(1 )(d) or (d.1) refers a matter to the Administrator, or
the Governor in Council advises the Administrator that he has
reasonable grounds for believing that a supplier, employer or
other person other than an employee to whom the guidelines
apply has contravened, is contravening or is likely to contravene
the guidelines, the Administrator shall make such inquiries and
undertake such investigations within the powers conferred on
him by this Act as in his opinion are required in order to enable
him to determine whether the supplier, employer or other
person to whom the reference from the Anti-Inflation Board or
the advice from the Governor in Council relates has contra
vened, is contravening or is likely to contravene the guidelines.
The Administrator determined that under what
are called the "arithmetic guidelines", referred to
in paragraph (1) (c) of section 44 above, the per
missible rates of increase in compensation for the
first and second years of the collective agreement
were 10.3% and 8% respectively. This part of his
order was not challenged. In the second part of his
order the Administrator dealt with the amount of
increase to be allowed over and above that permit
ted by the arithmetic guidelines in accordance with
paragraph 44(1)(d)—"such further amount as is
consistent with the objectives of the Act". The
Administrator found that there was an historical
relationship between the two groups but that it
was not a particularly strong relationship. "At
best," he said, "the relationship is an uneven corre
lation, it is of short duration, and it is not based on
wholly comparable employee classifications." He
took the relative strength of the historical relation
ship into consideration in determining the amount
to be allowed under paragraph 44(1)(d). The
Appeal Tribunal agreed with the Administrator
that it was a relevant consideration, and this
aspect of the Administrator's decision is not in
issue before us.
76, c. 98, s. 4, reads:
12. (1) The Anti-Inflation Board shall
(d.1) where consultations and negotiations under para
graph (c) have resulted in a notification from the Board to
the parties involved that a change in prices, profits, com
pensation or dividends that varies from a change, if any,
specified in the notice would not, in the opinion of the
Board, be within the limits of the guidelines and would not
otherwise be justified and any party referred to in subsec
tion (1.2) advises the Board in writing that it is dissatisfied
with such notification, forthwith refer the matter to the
Administrator for consideration by him; ...
What is in issue is the Administrator's conclu
sion that in determining the amount to be allowed
in respect of the historical relationship in the
present ease he should take into consideration the
inflationary nature of the last increase obtained in
July 1975 by the "target group"—that is, the
custodial and maintenance employees of the Sud-
bury Board of Education in Local 895—before the
Anti-Inflation Guidelines became applicable. The
Administrator's reasons and conclusion on this
point are contained in the following passages of his
order:
The case under consideration raises the question of whether,
under some circumstances, there should be some further limita
tion on the degree of restoration. If the group with whom the
historical relationship is claimed has in its most recent experi
ence achieved an unusually generous increase prior to the
introduction of the program—for example, an increase substan
tially in excess of the cost of living experience for the period in
question—it is doubtful that restoration of the historical rela
tionship to such an inflated level would be "consistent with the
objectives of the Act."
In addition to my finding that the said historical relationship
is not a particularly strong one it is to be noticed that the rate
of increase in compensation paid the "target group" in 1975
took an unusually abrupt jump which was greatly in excess of
an increase in the cost of living index for the corresponding
period.
Applying the above-stated criteria in respect of historical
relationships to the facts as I have found them leads me to the
conclusion that the historical relationship between the said
groups of employees is given adequate recognition in keeping
with the objectives of the Anti-Inflation Act by not allowing a
complete catch-up in compensation by the employee group at
the inflated level of compensation paid the target group in 1975
but by allowing a maximum percentage increase in total com
pensation over and above that allowed by the arithmetic guide
lines for each of the first two guideline years of the employee
group of 1.7 per cent and .5 per cent, respectively.
In the result the Administrator permitted total
increases in compensation for the two years of the
collective agreement of 12% and 8.5%, as com
pared to 12.63% and 8% recommended by the
Anti-Inflation Board.
The Appeal Tribunal held that the Administra
tor erred in basing himself on what he considered
to be the inflationary nature of the last increase
obtained by the target group at the time it was
granted, and on this ground it allowed the appeal,
referring the matter back to the Administrator for
reconsideration and variation of his order. The
order had also been appealed on the ground that
the Administrator had failed to comply with the
principles of natural justice, but it was not a
ground on which the appeal was allowed and it is
not in issue before us.
The decision of the Appeal Tribunal contains
the following passage on the point in issue:
Section 44 makes it clear that the objective is to restrain
compensation without undue disruption of the historical rela
tionships that have in part determined employee compensation.
The objective, apparently, is as far as possible to restrain the
general level of percentage increases in compensation without
doing undue violence to accepted relative positions in the
hierarchy of wages. It appears to us inconsistent with this
objective for the Administrator to assess the target group's
compensation as being at an "inflated level" and on that basis
refuse to maintain an historical relationship. There is nothing in
the Anti-Inflation Act or the Guidelines to suggest that the
Administrator's power extends to second-guessing market
forces or the collective bargaining process as they operated
before the imposition of the Anti-Inflation program on October
14, 1975. Where he does so, as in this case, compensation will
be restrained and inflation thereby controlled but at undue cost
to the objective which is obviously to be served under Section
44 of the Guidelines: that of maintaining an established histori
cal relationship between the compensation of two groups of
employees.
The question is whether the Appeal Tribunal
erred in law in coming to this conclusion.
Section 44 of the Guidelines provides for a
"further amount" of increase over and above that
permitted by the "arithmetic guidelines" laid down
in sections 43, 45, 46, 47 and 48, but it is to be an
amount that is "consistent with the objectives of
the Act." Those objectives are "the containment
and reduction of inflation", as indicated by the
preamble of the Act which reads as follows:
WHEREAS the Parliament of Canada recognizes that infla
tion in Canada at current levels is contrary to the interests of
all Canadians and that the containment and reduction of
inflation has become a matter of serious national concern;
AND WHEREAS to accomplish such containment and reduc
tion of inflation it is necessary to restrain profit margins, prices,
dividends and compensation;
Paragraph 44(1)(d) of the Guidelines does not
confer an unqualified right to grant the full
amount of the increase that might be necessary in
a particular case to maintain an historical relation-
ship. It is a right that is qualified by the necessity
to consider the objectives of containment and
reduction of inflation—in other words, the infla
tionary impact of the proposed increase. Obvious
ly, some balance must be struck between the
claims of an historical relationship and these
objectives. That balance is a matter of judgment,
left to the employer in the first instance, but
subject to challenge by the Anti-Inflation Board
and determination by the Administrator'. The pre
cise question for determination in this case is
whether, in considering the inflationary impact of
a proposed increase to maintain an historical rela
tionship, the Administrator may properly consider
the inflationary impact, at the time it was granted,
of the last increase obtained by the "target group"
before the Guidelines went into effect.
The Act reflects concern with the current levels
of inflation prevailing at the time of its enactment,
but the containment and reduction of inflation are
to operate by restraint of actual and proposed
changes in compensation after the anti-inflation
program has come into force. This is clear from
the terms of section 12(1)(c) of the Act concerning
the duties of the Anti-Inflation Board. As indicat
ed by section 17, the Administrator is to determine
whether there has been or is likely to be a contra
vention of the Guidelines. What the Administrator
must consider, therefore, in the application of
paragraph 44(1)(d) of the Guidelines is whether
an amount of increase for the purpose of maintain
ing an historical relationship would be inconsistent
with the objectives of the Act because of the
inflationary impact it would have. Did the
Administrator in the present case fail to address
himself to this question in invoking, as he clearly
did, the inflationary nature in July, 1975 of the
last increase obtained by the "target group"?
3 A originally adopted, paragraph 44(1)(d) of the Guide
lines read "such further amount that in the opinion of the
Anti-Inflation Board is consistent with the objectives of the
Act." I take the removal of the words "that in the opinion of
the Anti-Inflation Board" as indicating that the Anti-Inflation
Board is not to be the final judge of whether such an amount is
consistent with the objectives of the Act, but not, as contended
by counsel for the applicant, that its determination is to be in
the sole discretion of the employer. It is to be subject to review
by the Anti-Inflation Board, the Administrator and the Anti-
Inflation Appeal Tribunal.
What the Administrator had to consider was the
inflationary impact of a proposed amount of
increase under a collective agreement to take
effect January 1, 1976. In doing so, I think he was
entitled to consider and be guided by the inflation
ary nature of the last increase obtained by the
"target group" in July, 1975. What was inflation
ary at that time could reasonably be assumed to be
inflationary six months later. For these reasons I
would set aside the decision of the Appeal Tri
bunal and refer the matter back to the Appeal
Tribunal for decision on the basis that the
Administrator did not err in law in taking into
consideration the inflationary nature of the last
increase in compensation paid to the employees of
the Sudbury Board of Education.
* * *
PRATTE J.: I agree.
* * *
RYAN J.: I concur.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.